McDonalds is preparing to launch a full-scale CRM program later this year or early next year, according to a much-quoted report in Nation's Restaurant News. It's a solid report (full disclosure: I penned quite a few pieces for NRN a few years back), but McDonald's may just prove to be a great case study for when a CRM program costs more than it helps.
There are three kinds of consumers at issue here. We have Group One, which is those who love McDonald's and are loyal customers; Group Two, which is those who detest McDonald's and everything it stands for; and Group Three, which is those who are not wild about the chain but will quite willingly go there when it's the best of weak options, such as when traveling and the choice is between McDonald's and an entirely unknown local restaurant with a frighteningly empty parking lot.
Say what you will, you members of Group Three, but McDonald's excels at quality control. Granted, that quality-level lever is set quite low, but it's valid to say that a Quarter Pounder will taste pretty much the same at any McDonald's.
Note: There's one exception to that "every store tastes the same" rule, but it doesn't affect many people. A few years back, I was at McDonald's world headquarters in Illinois, interviewing the new CIO. We were about to break for lunch, and the C-level said we should eat at the restaurant downstairs. Sure enough, it was a McDonald's. With visions of a five-star restaurant appropriate for a Fortune 100 C-level, the idea of a "you want fries with that?" lunch was a letdown. But the lunch was quite good. The meat was fresher, the fries were hotter and less greasy and the staff was attentive and responsive. When I asked, I was told that all execs are expected to visit McDonald's on their travels and to evaluate the restaurants and give their findings to the store manager. On the back of his business card was, indeed, a little restaurant performance form.
The point of that lunch, though, was that the exec conceded that it's a special effort, with experimental menu items and extra quality attention. "The CEO thinks this is what all of our restaurants' food tastes like," the CIO — who shall remain anonymous — said.
Let's get back to the CRM challenge. Unless you're visiting corporate headquarters, you are still going to find remarkably similar quality, for good and for bad. It's an economical meal, and you at least know what it's going to taste like.
Of those three groups, Group One (the loyal fans) are not going to be a big help. They already use McDonald's as often as they dare. Incentives from a loyalty program — even with date restrictions — are more likely going to be saved to lower the cost of the next trip, rather than incentivizing an additional trip. Given that the goals are to boost revenue and increase the number of visits, Group One is probably maxed out.
Group Two (haters are going to hate) are a lost cause. Offering free fries just isn't going to sway them.
This leaves us with Group Three, the folk who are not fans but will visit when circumstances make it easy. This is the only group where CRM could make a difference, and I'm making the argument that it won't work here.
In McDonald's category of fast food — known in the business as quick-serve restaurants, usually referred to as QSR — they overwhelmingly dominate in mind share. As a practical matter, that translates to: When those consumers want fast food, McDonald's is often the first name that crops up.
If McD's wants to boost its slice of the QSR market — which it does — it has little room to move, though it can thank decades of its own advertisements for that. Its better shot would be to increase how often those consumers find themselves in QSR-friendly situations (more business travel wouldn't hurt).
Other QSRs have their own very loyal customers, so it's unclear whose mind a traditional CRM program would change.
RetailWire had a really interesting discussion on this McDonald's CRM move. My favorite comment came from Dan Frechtling, chief marketing officer at G2. Frechtling hinted at resistance for this program's experimental predecessor, presumably among its franchise owners. "So far, their current app is resisted by the locations. I've tried using the app at locations shown on the app as participating and they refuse to accept it and have hidden the app scanners. This has happened in Granite Bay, CA and in the Reno, NV East Plumb locations," Frechtling wrote.
Without even getting into the particulars of CRM strategy, it's a given that if this program doesn't have full support from McDonald's franchisees, it simply has no chance of success.
A CRM program is different from what McDonald's has done thus far, which is more of a coupon effort. In general, supplementing a coupon program with CRM — where you can message specific customers with highly tailored offers — is a good idea. But it will likely not deliver for McDonald's because of McDonald's problems.
Rightly or wrongly — and in my view, it's rightly — McDonald's has been tarred as the worst offender in the healthy eating category. As that category grows, it will take revenue away from stores like McDonald's and will give it to those who are perceived to be healthier. This is not a game of truth, but of perception. The brand that McDonald's has spent generations cultivating is coming back today to bite it.
McDonald's recently enjoyed a big revenue boost from an all-day breakfast menu. This had little to do with health — unless your idea of healthy eating is melting cheese over Canadian bacon and a fried egg—but it did coincide with consumers' interest in having breakfast foods whenever they want them. (I have personally fallen for this one. Buying an Egg McMuffin at 7 p.m. felt countercultural. Yes, I do need to get out more.)
CRM is a great retail concept. McDonald's imminent case study to the contrary proves why McDonald's will unfortunately be the exception to the rule.
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