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…
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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.
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Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
