In March, 2015, McDonald’s CEO, Don Thompson was replaced by Steve Easterbrook after sales dropped down for the first time in 12 years. Net income in 2014 fell nearly 15%, to $4.76 billion. Steve Easterbrook, 47 years old, who started with McDonald’s in 1993 and was the former Chief Global Brand Officer then became the company’s third CEO in the past decade.
Among the challenges that McDonalds face currently, the Marketing Segmentation, Targeting & Brand Positioning have been highlighted. Although they have certain strengths in those, they also do have weaknesses that should be rectified in order to promote their brand, attract more customers, compete with other competitors & ultimately to increase their sales.
Is McDonalds bit struggling with Marketing Segmentation ?
Market segmentation is a marketing strategy which involves dividing a broad target market into group consumers who differ in their response to the marketing mix. Its objective is to design a marketing mix that precisely matches the expectations of customers in the targeted segment.
There are three ways to classify what the customer wants. It is known as needs, wants and demands. However, to decide the needs, wants and demands, you need to carry out segmentation first. And in segmentation, the first step is to define the target audience, the product and whether it falls in the needs segment, the wants segment or the demands segment. Once it is decided, then can decide on the market segmentation.
Demographic based Marketing Segementation
Demographic segmentation is one of the simplest and most widest type of market segmentation used. Segmentation generally divides a population based on variables. Thus demographic segmentation too has its own variables such as age, gender, family size, income, occupation, religion, race and nationality.
McDonalds is more concerned in introducing different types of meal categories to different age categories. At the moment, McDonalds have managed to attract kids with their special kid menus than its other competitors. But they have been struggling to attract young adults,teenagers & elderly crowd with their menus & price. The new CEO pays more attention to introduce special meals at a considerable cheap price which will suit the socio-economical status of all customers.
For some, McDonald’s menu is too complicated & some meals keep customers waiting for a long time when the customer expects to have fast-food. So the attention has also been directed to slim down the menu & to have a quick service.
This type of market segmentation divides people on the basis of geography. The potential customers will have different needs based on the geography they are located in.
Some countries like China, tend to have more outlets of KFC ( 4600 ) than that of McDonalds (2000), whereas Burger King also having 2000 outlets. Likewise, McDonalds is facing more pressure from other famous fast-food restaurants around the world.
Psychographic segmentation is one which uses people’s lifestyle, their activities, interests as well as opinions to define a market segment. Psychographic segmentation is quite similar to behavioral segmentation. But psychographic segmentation also takes the psychological aspects of consumer buying behavior into accounts.
Despite the great strides that McDonald’s has made in some markets, its progress and practices have not been uniform. In 2104, McDonalds — and other major food companies — were plunged into a food safety scandal in China. And such bad news doesn’t just reduce the impact of good work elsewhere; it means that its credibility is fundamentally undermined. Now McDonalds working on that, trying to rectify that & build a feeling of safe inside the heads & hearts of the customers.
This type of market segmentation divides the population on the basis of their behavior, usage and decision making pattern. Based on the behavior of an individual, the product is marketed.
McDonalds is encouraging their customers to celebrate certain occasions (eg- birthday parties) & at the same time trying to be family oriented. This has helped them a lot to stay within the competition.
How efficient is the Targeting Strategy of McDoanalds ?
A target market is the market a company wants to sell its products and services to, and it includes a targeted set of customers for whom it directs its marketing efforts. Identifying the target market is an essential step in the development of a marketing plan.
Understanding which segment when to apply, how profitable that segment will be & competitive comparisons are really important here.
McDonald’s traditional rival, Burger King targets young adults & low income customers. Where as Wendys targets health conscious, old individuals. McDonalds from the early days has made itself to be the family friendly restaurant. But now with their drop in sales in 2104, they are more concerned not only to be just family friendly, but also to be a low cost restaurant & they have introduced more fruits, vegetables, low fat dairy, whole grain products in order to attract health conscious customers & elderly individuals, rather than losing to their competitors.
Positioning is a marketing strategy that aims to make a product/brand occupy a distinct position, relative to other competing products/brands, in the eyes of the customer.
Usually McDonalds prefers more to be positioned as a low cost, family restaurant. But now they are putting their effort to be positioned as a healthy & safe restaurant after the food safety issues in the recent past.
Iacobucci, D (2014) Marketing Management (MM4)
Proctor, Tony (2000) Strategic Marketing
Weinstein, Art (2004) Hand Book of Market Segmentation