McDonald’s Delivery Service

Team L

Sarah Phipps

Lea Ann Pauli

Catherine Pillar

Oscar Mitchell

MKTG 3361_001

04/22/2014

Professor: Lisa Siegal

Table of Contents

1. Company Description…………………………………………………………………….1

2. Strategic Focus and Plan………………………………………………………….……....1

Mission Statement…………………………………………………….…………..2

Goals……................................................................................................................2

Nonfinancial Goals………………………………………………………..2

Financial Goals……………………………………………………………2

Core Competency and Sustainable Competitive Advantage…………………...…2

3. Situation Analysis…………………………………………………………………………3

SWOT Analysis………………………………………………………………...…3

Industry Analysis…………………………………………………………...……..4

Competitor Analysis……………………………………………………………....4

Company Analysis……………………………………………………………..….5

Customer Analysis……………………………………………………...…………5

4. Market Product Focus…...………...………………………………………………..……..6

Marketing and Project Objectives…………………………………………………6

Target Markets…………………………………………………………………….7

Points of Difference……………………………………………………………….8

Positioning………………………………………………………………….....…..8

5. Marketing Program…………………………………………………………………..……9

Product…………………………………………………………………………….9

Price Strategy……………………………………………………………..……….9

Place Distribution Strategy………………………………………………………10

Promotion Strategy………………………………………………………………10

6. Financial Data and Projections…………………………………………………………..11

Five-year Projection…………………………………………………………...…12

7. Implementation Plan……………………………………………………………….…….13

Rollout Schedule for the First 5 Years…………………………………..……….14

8. Evaluation……………………………………………………………………..…………15

1. Company Description

McDonald’s was originally founded in 1948 by brothers Dick and Mac McDonald as a

self-service, drive-in burger joint in San Bernardino, California. The main staple of the small 9

item menu was the 15 cent hamburger. In 1954 Ray Kroc discovered McDonald’s and decided to

make his future in hamburgers, taking the McDonald brothers up on their idea of a franchise. He

bought the Mc Donald’s name, and opened his first location

in Des Plaines, Illinois in April of 1955. This building

displays the architects “golden arches” that remain the

symbol of McDonald’s to this day. Mc Donald’s continued

to grow rapidly, opening 700 locations by 1965. In 1966

McDonald’s introduced their iconic figure, whom all children know and love, Ronald

McDonald. Making his debut by appearing in television commercials and the Macy’s

Thanksgiving Day parade, Ronald was an immediate sensation. Another big year was 1975 with

the introduction of the breakfast Egg McMuffin and the first drive-thru. And the ever famous

Happy Meal was introduced in 1979. By 1981 McDonald’s could be found in 32 countries. Over

the years McDonald’s has taken the opportunity of coining catchy phrases/tunes in their

marketing themes. For example, the 1995 theme “Have you had your break today?” and “Did

somebody say McDonald’s” from 1997, or even the phrase we are familiar with today,”I’m lovin

it”. McDonald’s remains a very successful company which currently operates in 119 countries.

2. Strategic Focus and Plan

Photo courtesy of panoramio.com

This section covers three main categories of McDonald’s overall strategic focus and plan:

Mission, Goals, and Core Competency and Sustainable Competitive Advantage.

Mission

“McDonald's brand mission is to be our customers' favorite place and way to eat and

drink. Our worldwide operations are aligned around a global strategy called the Plan to

Win, which center on an exceptional customer experience – People, Products, Place,

Price and Promotion. We are committed to continuously improving our operations and

enhancing our customers' experience.” (aboutmcdonalds.com, 2014)

Goals

Within the next five years McDonald’s would like to achieve the following goals.

Nonfinancial goals

1) Continue to build the McDonald’s brand by focusing on customers needs.

2) Insure that as the brand grows the company is gaining long-term repeat customers.

3) Continue to introduce new items as well as phase out old items.

4) Promote and insure a menu, which contains an array of healthy alternatives.

5) Introduce delivery service in several metropolitan areas with the intent to eventually

offer delivery in 85% of McDonald’s restaurants.

Financial goals

1) A system wide sales growth of 3-5% in addition to a 2% per year increase in revenue

due to delivery implementation.

2) Operating income growth of 6-7%

3) Return on incremental invested capital in the high teens. (news.mcdonalds.com)

Core Competency and Sustainable Competitive Advantage

Part of McDonald’s core competency is the convienence they provide to customers. This

convienence will only increase with the inclusion of the delivery service. Also, the quality and

volume of production and the speed at which the product is delivered adds to McDonald’s core

compency level. They are able to provide a quality product in both terms of flavor and price.

“We always strive to be better tomorrow than we are today. This, more than anything,

speaks to who McDonald's is as a company. The overarching goal of our sustainability

efforts is focused on continuous improvement through our five focus areas: Nutrition &

Well-Being, Sustainable Supply Chain, Environmental Responsibility, Employee

Experience, and Community.” (aboutmcdonalds.com, 2014)

3. Situation Analysis

SWOT Analysis

Strengths1. Largest fast food market share in the

world2. Brand recognition valued at $40 billion3. $2 billion advertising budget4. Locally adapted food menus5. Partnerships with best brands6. More than 80% of restaurants are owned

by independent franchises7. Children targeting

Weaknesses

1. Negative publicity2. Unhealthy food menu3. Mac job and high employee turnover4. Low differentiation

Opportunities

1. Increasing demand for healthier food2. Home meal delivery 3. Full adaptation of its new practices4. Changing customer habits and new

customer groups

Threats

1. Saturated fast food markets in the developed economies

2. Trend toward healthy eating3. Local fast food restaurant chains4. Currency fluctuations5. Lawsuits against McDonald’s

Figure 1: Jurevicious, 2013

Industry Analysis: Trends of Fast Food Delivery

At the top of the list we have already seen that pizza has made a huge profit from home

delivery service. Many Americans can relate to “hey lets order a pizza”, with a timely delivery

and hot and ready to serve bags. But recently we have seen a new trend, rearing its head, Fast

Food burgers. Leading competitors like Burger King, and McDonald’s are venturing into the

world of bringing its services to you. Obviously this will come with much competition; sense

consumers only relate home delivery to pizza. But trends are changing, and so must fast food

companies if they want to grow with the times. In fact, research has shown that there is a demand

for it. Recently, many fast food joints have actually ventured to add additional lanes to their

drive-thru for better service and time. Studies have shown that even catering has hit its stride

with an increase, as shown with companies, such as Panera Bread, which has to thank 8% of its

total sales in 2012 to just catering alone (Friend,2013). It is safe to say that there is definitely a

market for a home delivery service, not specific for just pizza.

Competitor Analysis: Who are we competing against?

As we move from drive-thru and a quick pick up to delivery, McDonald’s also changes

competitors. Instead of just competing against other fast food burger places, they also have to

keep in mind competitors that deliver, such as pizza and Chinese food. Even though the kinks are

still being worked out, one of the biggest competitors we see is Burger King. Since the rollout of

their delivery service, it has been trying to take the number one spot. Even though McDonald’s is

just putting one toe in the water, Burger King has already ventured into setting up a website, as

well as, pushing delivery into 34 stores in Florida, 13 in New York, 11 in Texas, 9 in Maryland,

and 8 in Virginia (Tice,2012). Mainly we seek delivery in pizza because for Americans that has

become staple in our homes. With Fast food, specifically burgers, there has to an open-minded

consumer that is willing to try it and then recommend it. According to Forbes writer Carol Tice,

there are four main reasons why consumers may not bite at the bit for a delivery burger: 1. Fewer

burger parties- pizza is a classic party favorite, and have based business on home delivery with

fewer sitting area in pizza joints, 2. Impulse buy – burgers are usually craved when already out

and about, 3. Cold Burger-yuck!, 4. Execution Risk – delivery is an art form, and burger joints

have little experience (Tice, 2012).

Company Analysis: Where are we going?

McDonald’s is continuously growing. In 1955 when we first started we were a small

burger hot spot, and now we have evolved into an internationally known franchise, and we are

still growing. In recent news, we have dabbled in delivery of fast food, and possibly expanding

into more parts of the US. As the economy has changed so have we, but we still need to

capitalize on consumer behaviors, and external data collected. In the long-term, we will focus on

establishing and revamping existing locations (Strategist, 2014). Because there is a popular trend

with “health food” and a more conscience consumer, McDonald’s has the ability to modify and

tweak their menus to fit any consumer wants/needs. Along with our growth plan, McDonald’s

goal is to also push through into new markets and continue growing our brand. Plans are in place

to grow in expanding Asian and African economies (Strategist, 2014). Even though McDonald’s

has seen a bit of a declining and slow economic growth, we are still expecting to have growth in

the long term (Strategist, 2014).

Customer Analysis: Who to Target

Customer Characteristics: Customer grew up with McDonald’s as their go to, quick fix,

for a burger and fries. According the McDonald’s website, they like to think that they can fit any

type of consumer. With a variety of food options, healthy or otherwise, the demographic that

McDonald’s caters to is extremely varied. Most of the time we see a bit of a smooth tune, with

anywhere from ages 20-30 enjoying a tasty McChicken and a coke with friends. Or we can’t

forget all those awesome toys and souvenir cups and plates consumers love to collect. Whichever

the reason for a consumer’s trip to the big golden arches, McDonald’s truly does have an array of

customer profiles. Below is a list of target markets:

Customer ReasonsChildren 12yr & younger Toys in Happy Meals, Play sets in locationsYoung Adults 16-25 Fast service, price, convenience, Wi-FiBusy Parents Fast and Easy, price, cater to children

Health Trend: Most consumers know McDonald’s as the burger place that asks “would

you like fries with that”, and “do you want to super-size it?”, but with Americans taking a closer

look at their own personal health, McDonald’s also has to accommodate consumers as well. With

healthier options such as, apple slices in happy meals, or a variety of salads, wraps and yogurts,

it makes it easier for the consumer to make healthy choices and still enjoy the McDonald’s that

they have come to love.

4. Market- Product focus

This section describes a five- year marketing and product objectives for McDonald’s, and

the target markets, points of difference, and positioning of its lines of the McDonald’s Home

Delivery.

Marketing and Product Objectives

McDonald’s marketing intent is to be in competition with the pizza delivery businesses, and

to build on its revenue and reputation by becoming a delivery service while keeping up with their

fast food restaurant competitors. These are detailed in the four areas:

• Current Markets: Current markets will continue to bring in revenue. With continued

advertisements, repeat purchases, the dollar menu, and coupons, sales will grow.

• New Markets: The new market will bring a delivery service by the end of year 5. This

delivery service will be expanded to cities all around the country, and in countries’ where

access to roads, and vehicles are obtainable. The objective is to eventually have 85% of

McDonald’s restaurants offering the delivery service.

• Food Service: This will include all sales made by delivering a McDonald’s food product

to a location. Sales are expected to grow 2% or $480,000,000 for the first year the service

will be in place.

• New Products: The first year of the delivery service will first be setting up the market

strategy, setting protocols, and safety standards for maximum customer satisfaction and

employee safety. The delivery service will first be implemented in several metropolitan,

cities, and towns across the United States for the next two years. The product will then be

expanded to more cities in the country, and to major cities around the world where a

McDonald’s restaurant is located for the last two years. By then the product would be

fully brought into the market.

Target Markets

The primary targets for this product will be for youths and adults who want a

McDonald’s meal but do not have the capabilities or resources to get to a McDonald’s restaurant.

These individuals are usually the group that is interested in eating food from a restaurant that is

familiar or home-like, and who find value in the McDonald’s food items.

Points of Difference

The “points of difference”- the characteristics that make the McDonald’s delivery service

unique compared to its competitors. These characteristics fall into these three areas:

• Unique tastes and convenience: McDonald’s is known for its tasty, quick meals that are

is perfect for an individual who has a tight budget. The restaurant is also known to be in

locations close to residential areas, and cities, for the convenience of the residents in and

around these areas.

• Taste trends: McDonald’s looks at certain flavor preferences in particular areas in and

around the chain of restaurants and also considers the taste preferences in gender and age.

This is to ensure that every segment of the market is satisfied with the McDonald’s

product.

• Familiar Packaging: McDonald’s is known for its unique

golden arches, and its slogan “I’m lovin’ it”. This brands a

Photo courtesy of burgerbusiness.com

product as having the McDonald’s quality, and fast service that only McDonald’s is able

to provide.

Positioning

In the past McDonald’s has never delivered their product to individuals in and around

their restaurants. McDonald’s will put their quality, fast service into the delivery service that will

leave customers satisfied, as McDonald's slogan says “Lovin’ it”, and wanting more.

5. Marketing Program

The four marketing mix elements of the McDonald’s delivery service marketing program

are detailed below:

Product

After first summarizing the product line, the approach to product quality and packaging is

covered:

Product line: McDonald’s will deliver any of its items off the menu to a specified

location given by the caller.

Unique Product Quality: McDonald’s unique quality and flavor is what customers are

wanting and expecting from a McDonald’s restaurant. From the delicious, salty French

fires to the fresh cut garden salad, McDonald’s will continue on its reputation that has

been built up over the past 60 years it has been a restaurant.

Packaging: McDonald’s Golden Arch packaging is known worldwide. This has been

through a clever, and easy to remember motif, that has been used for over 60 years. Its

restaurants are strategically placed near highways or in populous areas. McDonald’s

advertising is on billboards, in magazines, and on TV commercials. The McDonald’s

Golden Arch is recognizable everywhere.

Price Strategy

The fee for delivery has been made to follow this method of payment, if the customer

asks for the order to be delivered:

If a customer’s order is $10 and below, a 5% delivery fee will be put on top of the order

payment. If a customer’s order is between $11- $20, a 4% delivery fee will be added. If a

customer’s order is between $21- $30, a 3% delivery fee will be added. If the order is between

$31- $40, a 2% delivery fee will be added. If the order is between $41- $50, a 1% delivery fee

will be added. Orders adding up to $51 and above will not have a delivery fee added. Note that

this is a general structure for the delivery fee system. Rates will also depend on how far the meal

must be delivered, and the area that the meal is being delivered to. (ex: The delivery fee will be

more if the gas prices are higher or if traffic is a continuous factor in the delay of a meal

delivery).

Place (Distribution) Strategy

McDonald’s restaurants are distributed throughout several metropolitans, towns and cities

throughout the United States, and in major cities and airports throughout the world. There will be

more restaurants built as demand for the McDonald’s product market grows. McDonald’s buys

its ingredients from several different suppliers and retailers, and distributes them to their many

restaurants. As sales grow, McDonald’s will have to buy more supplies to keep up with the

demand of its consumer’s wants and needs.

Promotion Strategy

Key promotion strategies feature advertisements, online delivery orders, and coupons to

try and get customers to order delivery.

• Advertisements- McDonald’s will air commercials online and on the television about the

restaurant and the new delivery service option to catch the attention of the younger

generation. McDonald’s will also put up billboards, and magazine/ newspaper

advertisements to catch the attention of the older population that is often in a vehicle

and/or prefers reading over television.

• Online Delivery Orders- McDonald’s will have the option to make it convenient for

customers who prefer to take their time looking at the menu. This also makes it

convenient for those who know exactly what they want and do not want to have to deal

with the interference that comes with talking over the phone. Making the delivery service

convenient is a way to generate more customer loyalty and ensure the customers will get

the service they want.

• Coupons- To generate repeat purchases through the McDonald’s delivery service,

coupons will be distributed in the following five ways:

• Direct-Mail coupons- these coupons will be spread to the households in and

around the area of a McDonald’s restaurant. This gives the customers at home the

option of asking for delivery and already having the delivery number instead of

having to look it up.

• Coupons received in the drive-thru - these coupons will be passed out to

customers that may become, or are repeat customers.

• Online coupons- these will be given to the customers who receive several things

online through email or messaging.

• Sunday newspaper inserts- these will be received by customers in a wide area to

help increase customer purchases.

• Mobile app coupons- these coupons will be received by any customer who has a

mobile phone and signs up for the free app.

6. Financial Data and Projections

McDonald’s has experienced an increase in revenue between the years of 2009 to 2013.

The annual revenue has increased by approximately 7.5 million dollars within the 4 years. The

introduction of the delivery service will provide an extra boost in the annual revenue for the

years of 2014 through 2018 and beyond. Below is the amount of revenue earned for the listed

years.

Year 2009 Year 2010 Year 2011 Year 2012 Year 2013

Currency in Millions 22745 24075 27006 27567 28106

Revenue

Currency in Millions

Five-year Projection

McDonald’s five- year financial projection for the delivery service, will forecast an

annual revenue increase to the sum of approximately 2 to 4 percent. These percentages are based

on the how much the customers utilize the delivery service, it also depends on the market

overview of McDonald’s competitors once the delivery service has been implement. The

fluctuations in market place throughout the five-year trial point will play a vital role in

accumulating the maximum percentage of annual revenue. The figures on the next page display

the lower percentage rate for the first five years beginning with the revenue earned in

2013.

Year 1 Year 2 Year 3 Year 4 Year 5

ActualDelivery Service

Delivery Service

Delivery

ServiceDelivery Service

Delivery Service

Financial Element 2013 2014 2015 2015 2017 2018McDonalds in US 14278 1428 3212.5 3212.5 3212.5 3212.5

Net Sales (Millions)4,744.3

0 4,839.20 4,936 5,035 5,136 5,238Gross Profit (Millions) 2742.8 2797.66 2853.61 2910.7 2968.91 3028.29

7. Implementation Plan

The McDonald’s Corporation will now provide our customers with a convenient service

of having food delivered to their businesses and homes. McDonald’s currently has over 14,000

restaurants within the United States. During the current 2014 initial year, McDonald’s will begin

the delivery service with 5% of the restaurants located in the downtown and metropolitan areas

of U.S. cities. The first years for the delivery service coverage will not extend beyond a 3-mile

radius of the McDonald’s restaurant locations for this initial trial year. We will carefully analyze

the results of the data collected from the sales forecast from the initial delivery service year to

correct any noticeable problems in the service. The McDonald’s Corporation in 2015 will extend

the delivery service to include 15% more restaurants of the U.S. cities downtown and

metropolitan areas. In the 2016, we will extend the delivery service to 20% more restaurants;

25% more in 2017 and 25% for 2018. At the 5-year point, the delivery service will be an option

for the McDonald’s customers for every restaurant location in the cities of the U.S. The table

below displays the first initial 5-year rollout schedule for the delivery service.

Rollout Schedule the First 5 Years

* % Of stores set

to initiate delivery service

The ideal for implementing the delivery service is to target the consumers that have

visited our restaurants throughout the duration of the current year (2014), and to focus on

increasing those consumer numbers for the next 4 proceeding years. McDonald’s implementation

of the delivery service will also increase our popularity, thus helping McDonald’s to enter the

delivery market with other restaurants that offer the same type of service for their customers.

Our overall goal is to increase customer satisfaction and to compete with other restaurants that

provide a delivery service.

Targeted areas % of

stores*

Year 1

2014

% of

stores*

Year 2

2015

% of

stores*

Year 3

2016

% of

stores*

Year 4

2017

% of

stores*

Year 5

2018

Downtown

Area 5% 15% 20% 25% 25%

MetropolitanArea 5% 15% 20% 25% 25%

8. Evaluation

Through McDonald’s five-year plan, the increase and traffic from current and new

customers will increase revenue from 2-4%. This will assist in meeting company goals, and

moving the company into a new era of delivery. With McDonald’s already spectacular

reputation, the company plans to build on this by providing customers with a “bring it to you”

evolution. After the rollout schedule has begun, we can perfect our service by listening to our

customer’s feedback, and using surveys to make our delivery option smoother and easier for our

loyal customers. Overall the implementation will bring a guaranteed increase in revenue, and an

increase in customer traffic. This in turn, will continue to make McDonald’s more accessible in

multiple ways, and bring more customer satisfaction resulting in continuous long-term success.

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