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McDonald’s Case

Study

BrandScience Conference

16 Novembro 2007
McDonald’s Today
Trends
Growing demand for time
saving solutions

Emergence of the
“Smart consumer”

Quest for Well-Being “good


for the body and for the soul”
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McDonald’s Today
Business Results

2005 2006 2007


Rate of Sales Growth
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McDonald’s Today
Challenges

Understanding key business drivers and their potential

Pricing Food innovation

Operational
Store remodelling
Excellence

Brand Trust Extended Hours

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McDonald’s
Challenges

Maximizing our marketing budget in times of limited resources

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McDonald’s
Challenges

Balancing short-term and long-term initiatives

Marketeer Franchisee

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McDonald’s

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McDonald’s and BrandScience

Development of a solution that:

Quantify the impact of business drivers

Aids sales forecasting

The basis for budget optimization, specially the media budget

Econometric modelling

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McDonald’s
BrandScience Results
Identifying key sales Drivers

Seasonality Price

Promotions Advertising

Product
Stores Brand
Variants
&
Timetables Performance

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McDonald’s
BrandScience Results
Quantifying Effects
sales

Base + Seasonality

weeks
Base Price Stores+Timetable Brand Performance Product Promotions Advertising

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McDonald’s
BrandScience Results
Quantifying Effects
New product launches
Increasing brand consideration

Price Timetable Brand Performance Product Promotions Advertising

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McDonald’s
Seasonality Learnings
End of Month Effect: results suggest that most people are paid close to the
end of the month, as such are more willing to “eat out” in the 2 following
weeks. As the end of month approaches, a negative impact is visible
Extremely important for promotional activity scheduling
Children's Day

Xmas

8th December

1st December
Incremental sales

1st November

5th October

1st school week

Corpo Deus
2nd week

4th week

5th week
1st week

3rd week

25 Apr

Carnival

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McDonald’s
Product Insights

Increasing the Eurosaver program’s product offering has proven


effects over sales
Synergies' with
Summer weeks
Incremental sales

Incremental Sales Effect


Eurosaver indicator

Eurosaver offering
weeks
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McDonald’s
Product Insights
The introduction of new products produces a novelty effect that
lasts for at least 4 weeks an in a recent period this effect has risen
and lasts longer
New Product
Launch New Product
Launch
Incremental sales

2nd week

4th week

5th week

6th week

7th week

2nd week

4th week

5th week

6th week

7th week

8th week

9th week
1st week

3rd week

1st week

3rd week

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McDonald’s
Product Insights
Happy Meal - different offers have different levels of appeal, hence
the effect over sales is also quite different

Summer
Xmas
Incremental sales

Incremental Sales HM

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McDonald’s
Promotion Insights
Two different types of promotion: the 1st offering a price discount,
the 2nd implying a special offer when buying a particular product.
Both have a significant effect over sales, even though the discount
on average has a higher impact

Free Gift B
Non food item
plurchase
Free Gift A
Incremental sales

Incremental sales

Promotion Intensity Special offer distribution waves


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McDonald’s
Brand Performance

Increasing brand performance

TV GRP's Eq. - Brand Campaigns Brand Performance Press - Brand Campaigns

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McDonald’s
ROI
Promotions and advertising have very different levels of return on
investment.
Price discounts produce a high level of return, however it isn’t taken
into account the forgone revenue due to a price decrease.


Sales uplift
ROI =
“ Investment
ROI

Price Other Special TV


Discount Media Offer Advertising
Avertising

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Econometric Modelling
Media planning implications
Media – ROI

McDonald’s advertising is highly focused on TV, however return by media


figures show that radio is also a valuable media.

Ad Spend by Media RoI by Medium


2%
2%
2006
2% 2%

2005

95%
ROI
OUTDOOR
PRESS
95% RADIO
TV Radio Press Outdoor
TV

Note: ratecard values


Source: MediaMonitor
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Media – ROI per campaign Type

Promotional or price related campaigns tend to show higher ROI

Different campaign types have different sales impact which affects the
level of return by medium

RoI by Campaign Type


ROI

HM
Promotion

Promotion
Product
Brand

New

B powered by

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Media – Carryover Effect

An advertising campaign effect extends beyond its own life period, and how long
this effect last is a function of creative, campaign type and media used.
Promotional campaigns have a half life period of three weeks, however for new
product campaigns this figure is closer to two week

Half Life by Campaign

Promotions

Brand

New Product
1
2
3
4
5
6
7
8
9
10
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Media – Advertising Effect

S-shape curves applied to advertising: identifying saturation points and


investment thresholds

Saturation point

A B C D
Incremental Sales

Minimum level of investment

Camp A
Camp B

Investment
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Media – S shape curves

These curves provide guidance in media planning, allowing for wastage


minimization

S- shaped curves by Campaign Type

BRAND
NEW PRODUCT
PROMOTION B
PROMOTION A
Incremental Sales

GRP’s
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Media Synergies

The incremental effect of tv activity tends to be higher when radio campaigns


are being aired, there is also a visible effect related to outdoor activity.
Tv also enhances other media performance

TV Effect Radio Effect Outdoor Effect

Incremental Sales
Incremental Sales

TV only
TV+Radio
TV+Radio

TV+Outdoor

Radio

TV+Radio
TV only

Outdoor

TV+Outdoor
only
TV+Outdoor

only
Time
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Media scheduling

Consumer income doesn’t affect solely the sales pattern but also media
performance. Starting an advertising campaign in different weeks of the month
affects media return

TV Effect - 1st w eek month

TV Effect - 2nd w eek month

TV Effect - 3rd w eek month


Incremental Sales

Time
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Scenario Evaluation

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