MCDONALD’S BIG VALUE PLAY NOT WORKING

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2018-07-30 11:00:00

A new 2 for $5 mix-and-match deal, he said, will launch in early August and feature some of its “iconic” sandwiches. McDonald’s already ran a 2 for $4 national offer on breakfast sandwiches for several weeks beginning in mid-March.

“We must be competitive on value,” Ozan said. “We don’t strive to win on value but we won’t lose, either.”

A change was announced in the company’s advertising as well. McDonald’s, which has long advertised at both the national and local levels, had more recently emphasized national deals while reducing its number of co-ops and agencies. (McDonald’s had gone from 180 co-ops down to 56, and from 44 local marketing agencies to five, and reduced the amount restaurants contribute to marketing, Easterbrook said.) During the call, executives acknowledged the need for localized advertising, especially for the breakfast rush.

“Are we running at peak performance year-to-date in terms of just the effectiveness and efficiency of our marketing? Probably not,” Easterbrook said. “There’s no plans to change the marketing contribution, it’s just what we do with it.”

Local markets, for instance, might start highlighting specific breakfast items in local ads. Biscuits, for example, do better in the south than in some other parts of the country.

McDonald’s isn’t the only company looking for fresh ways to bring in more diners. On Thursday, Dunkin’ Donuts posted its ninth consecutive quarterly decline in traffic at U.S. locations. Dunkin’s U.S. same-store sales rose 1.4 percent in the second quarter, driven by an increase in the average spent per transaction, with growth in sales of breakfast sandwiches and frozen drinks. Dunkin’s been hyping its Go2 value play, which offers a mix of products at two for $2, $3 or $5.

And Wendy’s, home of the 4 for $4 meal deal, came out with a limited-time $1 buffalo ranch crispy chicken sandwich in late June to compete against the $1 classic chicken sandwich at McDonald’s.

The national rollout of McDonald’s fresh beef Quarter Pounder patties in May has been a hit, executives said on the call, but slowed operations by a few seconds, particularly in the drive-thru lanes where the Golden Arches does the majority of its business. While a few seconds might sound minor, it can add up to a lot at a chain like McDonald’s, where speed is critical.

McDonald’s continues to tinker with its mobile app. In mid-July, it began asking app users to vote on the next day’s breakfast offer in a “Deals on the Rise” promotion, one of several concurrent deals running on the app.

One other thing to keep an eye on at McDonald’s is the number of locations, which fell to 13,972 at the end of June, down from 14,079 a year earlier. Dunkin’, meanwhile, added 64 net new U.S. shops during the quarter, bringing its total to more than 9,200.

Jessica Wohl writes for Crain’s sister publication Ad Age.

More:

• Inside the McDonald’s at the burger giant’s new HQ

• McDonald’s plans job cuts in regional office restructuring

• Why McDonald’s may be safe in China



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