New McDonald's gains momentum

Judie Lannon talks to Jill McDonald, the Marketing Society’s Marketer of the Year, about how McDonald’s learned to listen.

JUDIE LANNON: I understand you were head hunted from British Airways for this job. What skills did they think you would bring to McDonald’s?

JILL MCDONALD: They were looking for somebody who had brand experience. McDonald’s is good retail marketer, but they wanted somebody who was going to take the brand forward. I think that was the pull I had over other candidates. And, of course, the chemistry. I really clicked with these people. McDonald’s is a massive company, so chemistry was important.

I think they could see somebody who they could work with and had got brand experience from the service sector – particularly from the practical side. In an airline, it doesn’t matter how clever the things you come up with are unless they work in an airport terminal or on an aeroplane which is physically constrained. The operational constraints in a restaurant chain like McDonald’s are similar. Sometimes marketers will cut themselves off from the operational side. But ultimately delivering what customers want is all that matters.

JL: Tell me about the McDonald’s evolution. It looks like someone finally woke up and said we have to respond to these attacks. How did that happen? Can you talk me through that?

JM: It started before I came into the business. In the early 2000s McDonald’s had simply fallen behind. The business had been expanding by opening new restaurants but there came a point where the demand was falling. And that was quite a shock for McDonald’s. The company was out of touch with the major trends in society.

JL: What were the main causes do you think?

JM: We were getting a lot of negative publicity and we hadn’t responded. We’d just gone quiet. But then, when performance started falling, people had to stop and take a big step back and really think about what was going wrong with the restaurants.

Society was changing quickly, consumers were changing quickly, and we tended to keep our heads down and either apologise for what we do best – which is making burgers – or think about turning into a salad company, which was obviously the wrong way to respond.

But eventually we realised we needed to take a more positive stand and stick our head up with a clear view of what our core business was. We had to be more confident as well as more open and transparent in our relationship with detractors.

JL: It’s interesting that a company as big as McDonald’s, which is in touch with consumers all day every day, took so long to respond. There was litigation, and Supersize Me and all the publicity that went along with both environmentalism and obesity.

JM: It’s always easier in retrospect than when you’re in the middle of it. Also, the external perception of McDonald’s is so different from what it feels like to work here. The soul of the company is good but when you’re being attacked quite viciously from a number of different sides, the temptation is to just shy away from it. Particularly if you are growing through opening restaurants, which tends to cloud the fall in base demand.

JL: So did the people at that time just sit down and say we’ve got to rethink this thing altogether, or did it come in bits and pieces, and at what stage did you come into it?

JM: I think one of the key moments was when Steve Easterbrook was made Chief Executive. Steve decided we needed to rebuild our own internal confidence. There was nothing to be ashamed of, we wanted and we needed to be more open and transparent.

That was a very symbolic step because it triggered the start of a new era. Steve is very focused as a CEO. He was determined that there was no point doing superficial glossy things, we had to fix some fundamentals.

In addition, we had to make some surprising moves that would challenge people’s perception of McDonald’s.

JL: And what were the three or four fundamentals that had to be fixed?

JM: Number one was to stop getting so het up about the PR environment and focus on quality, service and cleanliness. This is what customers want from our restaurants. Make sure that we had all the right systems for monitoring and fix problems at their root cause.

So delivering operational excellence was top priority. There was a massive reinvestment in kitchen equipment so that we could offer healthy option food, particularly chicken, which was a major area of the food-eating-out market that we weren’t catering for.

Also, we increased the proportion of restaurants that are franchised. McDonald’s around the world is around 75% to 80% franchised. In the UK a few years ago it was probably more like 60% company, 40% franchise. If you’re putting restaurants in the hands of local business men and women, it’s their livelihood because it’s a 20-year tenure that you sign up for. So there’s a lot to be gained from franchising restaurants

JL: It must have been difficult to get the balance right between the burgers and all of the new, more healthy fresh foods.

JM: Steve saw the company as a modern progressive burger company. And all those words are important. McDonald’s is a burger company, that’s what people love about it most of all, so that’s at the core. But our menu covers a broad range of different things. People do eat our deli sandwiches and carrot sticks, but basically they come because they love Big Macs and milk shakes.

JL: To what extent are the salads and other fresh foods window-dressing to be seen to be appealing to modern trends?

JM: We won’t put anything on the menu unless it sells because we have limited kitchen space. So everything has to sell. These items don’t sell in the same volume as the Big Mac or a hamburger, but, for example, we are selling three times more chicken than we did 18 months ago.

We also have things like fruit bags and carrot sticks, which sell very well. For example, we have sold over 30 million fruit bags since we introduced them five years ago.

JL: And what about the redesign of the restaurants, when did that start?

JM: Relatively recently – towards the end of 2006. We started on the high street where we were looking most outdated. We looked like an 80s brand rather than a brand for now. The design needed to have more vibrant colours but not so much red, which can be aggressive. But it’s important to stress that we wanted to be a better McDonald’s rather than a different McDonald’s.

We also needed to be more visible to young adults, but about a third of our business is families so we had to have an environment and seating that’s suitable for families. The designs have been rolled out across the world but are slightly different everywhere. There’s quite a strong European design feel, though.

JL: What evidence do you have that this is working?

JM: In May, when the sales results are published, Europe was up around 9.75% and the UK has delivered on that growth so we’re pleased with the way it’s going.

JL: What do you think is the most radical thing that’s happened in the time that you’ve been there?

JM: I would say probably the re-imaging, the new-look restaurants, because they are so visible, and this symbolised very quickly that something’s changed. It’s still McDonald’s but it looks different – more modern, and fresher. That was an effective tipping point for the brand.

But the thing that is really surprising to the outside world is the way we’ve expanded the menus – the amount of chicken and things like Rainforest Alliance coffee, which is very competitively priced.

JL: And what’s different in the way you communicate?

JM: There has also been quite a change in how we communicate – to consumers and to the wider public. There has been a sea-change in how we engage with the media.

We still advertise on television but we’re also using a lot more proactive PR to engage with our detractors.

We are spending more time with key stakeholders such as the Department of Health and the Food Standards Agency, and although we’re not going to necessarily agree on everything, you can’t even engage in a dialogue if you don’t understand what’s driving their agenda. They too will have no idea what we’re doing, if we don’t have regular conversations – a proper dialogue – to get our case across.

I don’t think people realise that after the Nordic countries, Sweden in particular, the UK is quite a long way down the track in terms of regulation, media attention and government intervention. We have some of the most stringent regulations in Europe.

JL: I would expect McDonald’s to benefit from the current recession with people looking for cheaper ways to entertain themselves. What is it looking like?

JM: We say we’re not recessionproof, but we are recession-resistant, and at the moment that’s really playing out. Our footfall is significantly ahead of footfall in the high street.

We have what we call a tiered menu – the Poundsaver, which is around 99p then we have our core menu, the Big Mac, and then we also have more premium items like special burgers. People really do like to go out to eat and it’s a treat for kids so we want to make sure we cater to all different needs.

JL: Many years ago it seemed like America had a positive image as the source of fast food when fast food was new and exciting. But given the negative image that America has in terms of its obesity problem, what does the American parentage mean now?

JM: We are owned by an American company and, of course, hamburgers are American in origin and we talk about the great taste of America in our advertising. But since the majority of our restaurants are owned and operated by local businessmen and women, I think there’s a balance. We certainly don’t shy away from it but don’t think it’s anything our customers are concerned with.

Also these days the global company doesn’t impose global advertising. We can create our own advertising and a lot of our menu messaging is local. A Big Mac is a Big Mac everywhere and we’ve hit on a universal formula that people love wherever they are. But most of the time we’re responding to people’s local preferences.

JL: It seems that you’ve always had a close relationship with Disney. Do you feel that’s out of date as well?

JM: We had a ten-year exclusive arrangement with Disney, which ended in December 2006. We still work with Disney if it has properties we want to go with, but it was a mutual ending of an exclusive arrangement. We wanted to be free to work with Dreamworks or Fox. Dreamworks, for instance, has some fantastic properties, such as Shrek, so now we don’t have a single exclusive agreement.

JL: So many food and drink companies are under attack today. What advice would you give to other marketing people who find themselves in the same position you did a few years ago?

JM: Stay close to your customers, listen to what all your stakeholders are saying and pay extra attention to what your customers are telling you they want.

For example, the advertising to children and the obesity crisis that we’re facing. There are many different views as to what companies should or shouldn’t be doing, so the first thing to do is go with the facts. We’ve spent a lot of time talking to mothers about advertising to children. They tell us they want McDonald’s to be a treat, so if you could make the food fun and exciting to eat so we could get good food into them, that would be helpful.

That’s possible because we have access to some of the best properties in Hollywood, so Shrek III or Bee Movie or Kung Fu Panda, which is out at the moment. So we can apply some of our marketing know-how to make the five-a-day fruit and vegetable choices on the menu really appealing. It keeps our brand relevant and it’s helping mothers get fresh fruit and vegetables into their children.

They are quite comfortable with our food because they know we’re highly regulated as a market and they expect us to abide by all the regulations. But they want a trip to McDonald’s to be a treat for kids.

So my main advice is, stay close to your customers and don’t ever forget why they buy from you or come to you. Society moves on, so you can never stop listening and being prepared to change. It all sounds incredibly easy but when you’re in the middle of it, it can be a bit difficult to see the wood for the trees.

JL: And finally, when 2009 rolls around, what do you want to see for the company and for yourself?

JM: The answer to both parts of the questions is being part of a team that’s helped to turn around our business here in the UK. I want the momentum to continue so McDonald’s is one of the places people feel they can always come to and get great-tasting food at affordable prices.

 

The interior design of McDonald’s was outdated and needed more vibrant colours.

 

My main advice is, stay close to your customers and don’t ever forget why they buy from you or come to you. Society moves on, so you can never stop listening and being prepared to change.