Article
McDonald’s points finger at marketing for sales shortfall
As part of its operations reset initiative, the chain has started to see order accuracy improvements.
July 23, 2014 by Alicia Kelso — Editor, QSRWeb.com
As has been somewhat of a recurring theme, McDonald’s CEO Don Thompson had to field terse questions from analysts during the company’s earnings call Tuesday, asking why the company’s sales have remained lackluster for more than a year. During Q2, comp sales were down 1.5 percent.
These results followed Q1's 1.7-percent decline.
Thompson called this quarter’s results "disappointing" and admitted he is impatient with the slow-moving recovery, but assured investors that the chain is on the right path.
"We are moving in an appropriate direction. I am impatient, and I know our senior team is and our operators are. But we have to do this in the right way so we have long-term, enduring growth and not just a flash in the pan recovery," he said during the earnings call.
Thompson reiterated some of the strategies McDonald’s is taking en route to its long term objective, including a stronger focus on core products as well as value, improvement of operations and service, heightening brand awareness and accelerating digital efforts. McDonald’s is currently leveraging information from its France and Australia markets to enhance its digital presence in the U.S., including ecommerce. Thompson said initiatives are expected to be rolled out more broadly in 2015.
Re-establishing marketing leadership
Thompson said one of the brand’s major priorities is to "re-establish" its marketing leadership and its "emotional connection" with consumers. In doing so, the company has brought in new leadership and agency partners in some global markets.
"Leadership changes in marketing or agency … are not incremental effectiveness changes. Those are changes based upon the fact that we may not be getting the content or the reach or the awareness that we desire and demand as a McDonald’s brand. And when we make those changes we don’t do it lightly. Those are the kind of changes that we need to drive the business and those changes are occurring in several of our critical markets around the world," he said. The goal is to heighten awareness and create stronger messaging to "reinforce our place in customers’ lives."
Messaging will hone in on food quality and personalization/customization.
Operations
McDonald’s also continues to fine-tune its operations through its "Service Reset" initiative launched about six months ago. As part of this effort, the company is streamlining its merchandising, menu boards and product offerings to make it easier for customers to order and reduce complexity, which in turn should lead to better speed of service metrics. The reset also includes staff "recalibrations" to ensure the right amount of employees are on the clock at the right time of day. Thompson said the company has already started seeing a reduction in order accuracy complaints from these efforts.
Learning lab
Thompson touched on the company’s test restaurant in Southern California that features a build-your-own burger model. He calls the restaurant a "learning lab" and news of its existence broke in the fall of 2013. At the learning lab, guests can choose from a variety of toppings and build their burgers from an iPad ordering station. Thompson said the company is using the restaurant to "see what matters most to customers" in order to create an engaging experience.
"It’s about creating an engaging experience which addresses all elements of customer sensory perceptions and leverages the investments that we already made in technology, reimaging our physical plans and digital to create a more personalized memorable experience that our customers will feel good about," he said.
Not giving up on 2014
In general, Thompson suggested the pieces should be in place in 2015.
"We're moving with a sense of urgency but recognize that it will take time to see the results of our actions. We expect continued volatility across markets for the second half of the year and expect full year 2014 global comparable sales to be relatively similar to year-to-date June performance with July global comparable sales excepted to be negative," he said. "However we have not given up on 2014. This has to be a collaborative approach between ourselves and franchisees."
Franchisees, however, are growing impatient, he acknowledged. In order to ease their anxiety, the company conducts "more effective discussions and planning" with them about how to move the business.
"The franchisees are not at all-time highs and they want to get back to those levels and we want them back at those levels," he said. "So we have engaged in more communications around where we take this business. The franchisees are not searching for a silver bullet either."
