MARKETING PLAN

May 22, 2015[MARKETING PLAN]

MARKETING PLANA Project in Environmental Analysis for Philippine Business (BA 205)

Submitted to : PROF. SOFRONIO M. JUCUTAN Submitted by: MEDSILLE AEMON J. COQUILLA5/22/2015

EXECUTIVE SUMMARY The competition among the fast food restaurants has intensified over the last decade and with them fighting for bigger market share. In lieu with the said event, the world's biggest hamburger chain, McDonalds, is facing an onslaught of competition from better-burger chains. On January 29, 2015, McDonalds Corp. said that it was replacing CEO Don Thompson with its chief brand officer, Steve Easterbrook after seeing their own customer visits decline at established U.S. locations for two straight years. It was the latest in a string of changes the company has announced in hopes of appeasing investors and winning back customers.

McDonalds has built a global empire based on the consistency of its products, down to the thickness of fries and the number of pickles on a sandwich. However, the upstart rivals have been able to capitalize on consumer demand for food that is perceived as healthier and made with fresher, natural ingredients.

To this end, McDonald's is simplifying menus, tailoring food to local tastes, offering custom burger and sandwich options, rolling out mobile services such as payments and ordering, and opening a social media "dialogue" with customers to cater their growing concern of decreasing sales due to the tough competition in the industry.

INTRODUCTIONOne of marketing problems affecting restaurant businesses is the tough competition in the industry. Trying to get a business stand out in a crowded marketplace is tough. Even large chain restaurants are facing tough competition from their rivals. The answer to this problem doesnt start with expensive advertising and more exposure but meeting the customer demands and discovering its edge in making it different and more appealing than its competitors.

The restaurant business is tough. Everyone in it knows it. Therefore, top officers should create stringent measures to make it float in the industry and to prevent it from flunking in the long run. In view of this, customers need a reason to come in their business instead of their competitors. While it is good to think that the food is so good that people will line up out the door to eat it, millions of mistaken restaurant owners are now out of business.

In this marketing plan, the most famous known fast-food chain, McDonalds, was being chosen to be given analysis since recent news about its decreasing sales triggered a drastic response from their top executives. Refreshing its image in the market and adapting to the wants of todays generation and trend were seen to be their response in the very tough competition that they are facing against their competitors. Indeed, it is not easy to maintain the top position in the industry but knowing what satisfies the customers and allowing the company to always provide with fresh presentation of their products may give them a competitive edge over their competitors.

Marketing Description and AnalysisThe fast food industry, also known as Quick Service Restaurants (QSR), has been serving up tasty food for as long as people have lived in cities. The modern system of fast food franchising is believed to have started in the mid 1930s when Howard Johnson franchised his second location to a friend as a means to expand operations during the Great Depression.

Fast food franchises focus on high volume, low cost and high speed product. Frequently food is preheated or precooked and served to-go. Consumers enjoy being able to get a familiar meal in each location, and menus and marketing are the same in every location.

There have been challenges for the fast food industry in recent years that have been pressuring profit margins. The industry as a whole has proven robust enough to withstand these challenges, though some players have done better than others.

Market saturation is also a relevant issue in the fast food industry today, at least in the U.S. There is a McDonald franchise is in almost every town, and it usually sits in a row with several competitors. With so many competitors which offer similar products there are fewer customers per location.

The major players in the fast-food market, which generates around $120Bin annual revenues, are: Domino's, Inc., Burger King Corporation, Wendy's International, Inc., Jack in the Box, Inc., Yum! Brands, Inc., Doctor's Associates, Inc., and McDonald's Corporation. As can be seen, the fast food industry is somewhat fragmented. The seven major competitors only account for 45% of total revenues.

Though McDonalds leads in the fast-food chain restaurant competition, recent events show that the company is plunging in its sales which heavily affected the company. It faces competition from other fast-food chains such as Burger King, which has been gaining market share with a simpler and cheaper version of the McDonalds menu. And it is being squeezed by more upmarket "fast-casual" restaurants such as Shake Shack and Chipotle Mexican Grill, which are rapidly growing. They have been luring customersparticularly younger onesaway from McDonalds chicken nuggets and chips by offering slightly better quality food, a high level of customization (such as the option to choose the ingredients in a burrito or burger) and some table service.

Some of McDonalds problems stem from operational mishaps across the world. In particular, its business in Asiawhere it makes nearly a quarter of its global revenueshas been hit by several health scares. Sales in China fell sharply after one of its suppliers was discovered last July to be using expired and contaminated chicken and beef. More recently, several Japanese customers have reported finding bits of plastic and even a tooth in their food. Geopolitics has not helped. Last year some Russian outlets were temporarily closed by food inspectors, seemingly in retaliation for American and European sanctions against Russia over its military intervention in Ukraine. Some politicians in Russia have even called for the chain to be thrown out the country completely.

PROBLEM STATEMENTThe world's biggest hamburger chain, McDonalds, is facing an onslaught of competition from better-burger chains. XXX

OBJECTIVE OF THE MARKETING PLANXXX

SWOT ANALYSIS

StrengthsDiversified incomeThe fast food chains revenues come from various countries, regions and products. It doesnt rely on one key source of income, unlike some of its rivals.

Strong brand name, image and reputationMcDonalds has built up huge brand equity. It is the no 1 fast food company by sales, with more than 31,000 restaurants serving burgers and fries in almost 120 countries. The image of McDonalds is recognized everywhere. This brand is in top ten of the most powerful brand names in the world with Coca-Cola, Nokia or GM. This comforts people because they know they can trust that the food that McDonalds makes is safe, cheap, and good.

Large market shareMcDonalds is considered as the largest player in size and global reach. When Wendys or Burgers King are losing market share in 2006, McDonalds still increases its market share. Market share of McDonalds in the recent time is about 19% while Yum!Brands is 9% and both Wendys and Burger King is 2%.

Economies of scaleThe more they make of something, the less it costs for each one. McDonalds mass produces French fries and burgers at one time in batches so they always have products ready for the customer.

WeaknessesCustomer loses due to fierce competitionMcDonalds has to compete with many strong brand name in fast food industry such as Wendys, Burger King or Yum!Brands. This fierce competition makes McDonalds loose a large number of customers who prefer favor of other brands.

Problem related to health issueMcDonalds uses trans-fat and beef oil in their food. Although it is not illegal, it affects badly on customers health because Trans fat is causes of some kind of cancer. Consequently, a number of customers who care about their health stop eating at McDonalds restaurants. It makes revenue of company decrease.

OpportunitiesIn todays health conscious societies the introduction of a healthy hamburger is a great opportunity. They would be the first QSR (Quick Service Restaurant) to have FDA approval on marketing a low fat low calorie hamburger with low calorie combo alternatives. Currently McDonalds and its competition health choice items do not include hamburgers.

In 2008 the business directed efforts at the breakfast, chicken, beverage and convenience categories. For example, hot specialist coffees not only secure sales, but also mean that restaurants get increasing numbers of customer visits. In 2009 McDonalds saw the full benefits of a venture into beverages.

Globalization, expansion in other countriesMcDonalds has more than 31,000 restaurants serving in almost 120 countries. Of the 31,000 restaurants, at least 14,000 are in US. However, now, because the care of McDonalds about favors and cultures in each countries it enters, McDonalds can open more restaurant in new areas such as China or India the countries which culture influences on people lifestyle deeply. They are very potential markets. The expansion of these areas is big opportunities For McDonalds.

Low cost menu is preferred by large number of customersWith low cost menu, McDonalds can attract customers who just have low income. This segment makes up a fairly remarkable part, especially in the recent time, when global economic is struggling. It is not difficult for McDonalds to apply low cost menu on all restaurants.

Diverse tastes and needs of customersCustomers tastes now become more diverse. As a result, they require new format of service in order to satisfy them. McDonalds, with new format of business such as McCafe, it can attract new segment of customer; for instance civil service, who prefer coffee as well as want to use Wi-Fi to work when drink coffee.

Economically speaking, McDonalds would be considered an inferior good due to the fact that they are a lot less expensive and have lower quality products compared to a normal good such as a restaurant. This means as consumers incomes decrease, the demand for an inferior good such as McDonalds would increase. This is an opportunity for McDonalds because the country is going through tough economic times now and people are either getting laid off or not able to find a job so when a family makes a decision about a meal, they would pick the cheaper one over the more expensive one.

ThreatsThey have been sued multiple times for having "unhealthy" food, allegedly with addictive additives, contributing to the obesity epidemic in America. In 2004, Michael Spulock filmed the documentary Super Size Me, where he went on an all McDonalds diet for 30 days and wound up getting cirrhosis of the liver. This documentary was a direct attack on the QSR industry as a whole and blamed them for Americas obesity epidemic. Due in part to the documentary, McDonalds no longer pushes the super size option at the dive thru window.

Intensity competitorsAlong with the development of fast food industry, there are many new fast food brand enter to the market. It is nothing to say if there is no strong brand which can compete with McDonalds. However, in fact, there are some and they are stronger gradually, for example Yum!Brands, Wendys or Burger King. Although market share of these brand are lower than McDonalds, they try to gain more customers from McDonalds. Moreover, more casual dining restaurants increase their burger offering and decrease the price. If we are not really hurry, we may choose this kind of restaurant instead of fast food restaurants. They also become the competitors of McDonalds.

Economic recessionThe company's revenue streams are diversified, but depending on the length of this "recession", they will inevitably be negatively impacted by the trickledown effect. Recession or down turn in economy may affect the retailer sales, as household budgets tighten reducing spend and number of visitors.

Changing society and the different eating patterns consumers haveAs time goes on people are starting to eat healthier and this is a threat to McDonalds because most wouldnt consider their food to be the healthiest.

ALTERNATIVE COURSES OF ACTIONFirst, although saturated in the United States, McDonalds has great expansion capabilities abroad. According to the grand matrix, market development is one strategy that McDonalds should implement. Company should prepare an international strategy which focus on big cities along with high populated areas, especially in Asia. There are not many McDonald restaurants in this potential market. Japan is the only Asian country which has a lot of McDonalds fast food restaurants. In contrast, China is considered as one of the biggest market in the world because of this countrys population. Nevertheless, according to the recent figures, China is just in ninth position among the countries which have McDonalds restaurants with about 1000 restaurant while this number in US is about 14000. If McDonalds can develop more and more in Asia, it is a huge advantage for company to gain market share.

Second, acquire a restaurant chain that is already riding the new trends like Chipotle Mexican Grill, Potbelly Corporation, or The Noodle & Company provided that one of these companies is up for sale and that McDonalds is willing to pay a hefty premium over current market valuation.

Third, leverage the companys core capabilities in franchising and logistics, to create two separate units one that caters to the low-calorie-low cholesterol consumers, and another that caters to the local and semiglobal segments of the world economy.

Fourth, the company should focus on its strength to develop stronger. However, the company seems not diversify its products regularly while competitors are stronger and have new products gradually. Because of this reason, McDonalds should spend more money on Research and Development to create new products and services as well as increase the efficiency of operations.

Fifith, McDonalds focus too much on cheese, beef or chicken menu, more than vegetable. For instance, McDonalds has fruit slice in menu. However, it is served once a week. In the recent time, with the change in eating habit of a large part of customers, McDonalds also should change. Company should bring new vegetarian products to restaurants menu. An organic menu is very necessary. This would give customers an alternative while allowing McDonalds to maintain its market share globally.

Sixth, McDonalds should put about six million dollars in advertisements using ads during TV commercials. The commercial should air between the times of 6 am to 10 am on weekends because this is the time range where young children get up and watch TV while their parents are still sleeping. This allows time for the advertisements to sink into the childrens minds and convince them that they want a happy meal from McDonalds. The ad should show Sponge Bob and Dora the Explorer eating a happy meal because they are famous characters in the shows that children watch. Those characters would be like celebrities to children so they would serve as celebrity testimonials saying to get a happy meal at McDonalds. The ads should be placed during specific tv shows such as morning cartoons. For example a good show to run the ad is during Sponge Bob, the Rug Rats, and Dora the Explorer.

RECOMMENDATIONMcDonalds has undergone several changes since its inception in San Bernardino, California. The fast food chain has conquered the US and it now focusing on the rest of the world. McDonalds, along with this trend, continues to strive toward customer satisfaction while still enhancing its international market position. The company is doing very well and keeps trying in Africa, China, and the Middle East, which will be continued source of revenue for many coming years. If McDonalds can overcome all of its challenges, makes use of advantages and has right strategies, it will win the market again and hold fast to first position in fast food industry.

The most emphasis should be placed on advertising because this directly speaks to the young children who McDonalds wants to buy the happy meal. The ads should be product specific to the happy meal and should be nationally run. McDonalds should use the push strategy to entice the young children to want to buy the happy meal.

MARKETING STRATEGYTarget MarketThere are multiple market segments that McDonalds must market too. They must market to young children, teenagers, seniors, families, and people who like to eat healthy food. The target market that I will address in this marketing plan will be the market of young children. The demographics of this target group would be both boys and girls of the ages 3-10. The geographicwould be any kids that live in the United States or within a few miles from a McDonalds. Psychographically speaking, McDonalds would market to all different social class structures but focus more on the middle to lower classes because the upper class would tend not to eat fast food as often. They shouldnt focus much on the upperclass the parents would have to work more to make more money leaving little time to listen to the children wine about wanting McDonalds. When it comes down to it, the reason we market to children is to get them to have their parents buy it for them but if the parents dont have time to listen to their children, then it could be a waste of money to market to them.

ProductThe important thing to remember when offering menu items to potential customers is that there is a huge amount of choice available to those potential customers with regard to how and where they spend their money. Therefore McDonalds should place considerable emphasis on developing a menu which customers want. Market research establishes exactly what this is. However, customers requirements change over time. What is fashionable and attractive today may be discarded tomorrow. Furthermore, since its competitors are also updating their products, McDonalds should consider the present trend and the customers wants if they really want to get ahead in the competition.

PriceThe customers perception of value is an important determinant of the price charged. Customers draw their own mental picture of what a product is worth. A product is more than a physical item; it also has psychological connotations for the customer. The danger of using low price as a marketing tool is that the customer may feel that a low price is indicative of compromised quality. Therefore, McDonald should be fully aware of the brand and its integrity in considering its food prices. A further potentially adverse consequence of price reduction is that competitors match the lower prices resulting in no extra demand. This means the profit margin has been reduced without increasing the sales.

PromotionsMcDonalds should continue in developing a campaign that makes people aware of a food item. This may be supported by in-store promotions to get people to try the product and a collectable promotional device to encourage them to keep on buying the item. It is imperative that the messages communicated support each other and do not confuse customers. A thorough understanding of what the brand represents is the key to a consistent message. The purpose of most marketing communications is to move the target audience to some type of action. This may be to buy the product, visit a restaurant, recommend the choice to a friend or increase purchases of the menu item. Key objectives of advertising are to make people aware of an item, feel positive about it and remember it. The more McDonalds knows about the people it is serving, the more it is able to communicate messages which appeal to them. Messages should gain customers attention and keep their interest. The next stage is to get them to want what is offered. Showing the benefits which they will obtain by taking action is usually sufficient. The right messages must be targeted at the right audience, using the right media.

PlacePlace, as an element of the marketing mix, is not just about the physical location or distribution points for products. It encompasses the management of a range of processes involved in bringing products to the end consumer.

SPECIFIC ACTION PROGRAMSIn order to find out how well the marketing plan is doing, I am going to track my sales through my marketing information system. If sales seem to be up and increasing, I will continue with the plan and enjoy the increased revenue. However if the sales seem to be decreasing, I must find out why. I will research which part of the plan is most effective. First I will send out a business memo to all the McDonalds stores that tells them that they must ask every child that walks in the store where they heard about McDonalds and what is the reason for wanting to buy the happy meal. Each month I will have the employees send the marketing department the childrens answers and we will have a better understanding of which ads are most effective and what promotional ideas led the children to want to buy a happy meal.

I will also create a focus group filled with children who half of them have eaten at McDonalds and half of them who have never eaten at McDonalds. The ones who have eaten there before will be asked what made them want to eat there in the first place. They will also be asked what they like about the happy meal and what they think needs to be improved in the happy meal. The answers to these questions will inform us what marketing strategy was most effective and what changes should be done to the happy meal. We will ask the children who never ate at McDonalds why they havent ate there and what could we do differently to make them want to eat there. As an incentive to join the focus group we will be giving all the children free happy meals. I will need to form 500 focus groups nationwide to get a good sense of what the children are thinking and this would cost us about 500 thousand dollars to cover the happy meals, the salaries of the people conducting the focus group and the researchers who watch the focus group.

Once the marketing strategy is in place, various responsibilities are given to different individuals so that the plan can be implemented. Systems are put in place to obtain market feedback which measure success against short-term targets. McDonalds has to ensure that this is done within the confines of a tightly controlled, finite marketing budget.

To keep up with rapidly changing consumer preferences, demographics, and spending patterns, McDonald's should introduce new items and campaigns to create more healthy foods (Premium Salads). The strategy reflects the philosophy that novelty, as opposed to loyalty to traditional products, is the key determinant of sales in the fast food industry.

REFERENCEShttp://www.dailymail.co.uk/wires/ap/article-2932115/McDonalds-new-CEO-faces-onslaught-competition.html

https://www.franchisehelp.com/industry-reports/fast-food-industry-report/

http://www.economist.com/blogs/economistexplains/2015/01/economist-explains-7

http://www.fao.org/docrep/w3241e/w3241e0a.htm

https://stonybrook.digication.com/Leggio-Leggio-philipleggio-Marketingplan/Marketing_Plan_for_McDonald_s/

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