The Genius Of McDonald’s

Aside from its performance as the largest fast-food company in America, McDonald’s (NYSE: MCD) has a genius for marketing and managing its menu.

Among its packaging options is its under-$3 menu, aimed, at least in part, at people who could not normally afford to eat out. It captures this group in a way that few other fast-food companies are able to.

For $3, patrons can get a McChicken or McDouble along with a small order of French Fries and a small soft drink. Patrons who pay $3 can also get a breakfast of a Sausage McMuffin, Hash Browns, and a small McCafé coffee.

McDonald’s has similar tiered value packages for $4 and $5 to bridge the gap to their premium items.

At the far end of the spectrum, a single customer could pay $15 or more for McDonald’s high-end signature sandwiches, large milkshakes, and large fries.

The genius is not just in the pricing; it is in the package.

Among the best marketing moves a company can make, no matter what business it is in, is an “all-in” package, which the $3 and $4 meals represent. This strategy mirrors certain car companies. Subaru, for example, often offers vehicles at a set price with very few extra costs beyond what the customer sees in the showroom. In contrast, most manufacturers offer cars with a long list of features that cost extra. The buyer who wants to drive off the lot with a single price calculation does not have to sift through options ranging from heated seats to a bigger engine. The long list of options is the Starbucks (NASDAQ: SBUX | SBUX Price Prediction) approach compared to the streamlined McDonald’s model.

Simplicity is underrated.

McDonald’s has demonstrated that its approach to the fast-food industry remains effective. Last year, revenue rose 4% to $26.9 billion, while EPS rose 5% to $11.95. Its dividend yield currently stands at 2.65%.

Genius produces results.

Editor’s Note: This article has been updated to correct the specific items included in the $3 value menu, adjust the descriptions of meal sizes, include mention of the $5 price tier, and refine references to financial metrics and company ticker links for technical accuracy.