McDonalds the Arch Deluxe Launch

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McDonalds: The Arch Deluxe

Launch Case Study

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How is McDonald’s doing?

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How is McDonald’s doing?

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Is this a good sandwich?

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Andrew Selvaggio, the creator of the Arch Deluxe

Arch Deluxe creator Selvaggio sees links between the sandwiches’ attributes and some potentially powerful childhood memories. The question is whether the sandwich will evoke those same memories in the minds of target customers.

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How would you describe the Arch Deluxe position? ??? A hamburger for adults…

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Why has McDonald’s been so successful? ???

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Why has McDonald’s been so successful? A firm’s competitive advantage consists of

three key components: Sources of advantage (skills and assets), Positional advantages (superior customer value

and/or lower relative costs), and Performance outcomes.

McDonald’s success. The company’s sources of advantage include both assets (e.g., employees, retail outlets, real estate, financial resources, supplier network) and skills (e.g., franchisee training, employee training, restaurant audits).

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Why has McDonald’s been so successful? In 1994 Day defined a firm’s capabilities as

“complex bundles of skills and accumulated knowledge.” McDonald’s skills certainly include the fast provision of

consistent food in a clean environment for reasonable prices. These capabilities reflect McDonald’s values (QSCV quality, service, cleanliness, and value) and are ⎯supported by the accumulated knowledge and skills of employees, technical systems such as the clamshell grill, and management systems such as franchisee training manuals and Hamburger University.

McDonald’s skills and assets have enabled McDonald’s to develop a positional advantage with consumers as a place for family meals.

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McDonald’s been so successful? Key elements of McDonald’s business strategy

include a focus on families, an emphasis on franchisee profitability, and an insistence on tight control over both suppliers and

franchisees. McDonald’s enjoyed timing advantages because

the company was the first national fast-food chain to emphasize these elements.

McDonald’s was also the first chain to target parents through children, and exploit the power of national television advertising.

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McDonald’s Challenges… McDonald’s ability to turn skills and assets into a

positional advantage has been affected by competitor marketing strategies.

While competitors have not been able to challenge McDonald’s on cleanliness, they have attacked on other fronts by attempting to redefine quality, service, and value:

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Who goes to McDonald’s? When? Why? Why consumers choose McDonald’s over

other fast-food alternatives.

When children are present, McDonald’s is an attractive fast-food alternative. So a challenge for McDonald’s is the presence of active, noisy children makes the atmosphere less attractive to adults unaccompanied by children.

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When you think of McDonald’s, what comes to mind? Consumer benefits (e.g., speed, and

convenience), marketing associations, and users.

The common theme that ties these brand associations together.

“McDonald’s is a place for families with kids.”

Need to understand the relationship among skills and resources, position, and performance

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The Arch Deluxe launch The Arch Deluxe’s apparent lack of impact to the sandwich

itself. Specific objections to the sandwich include: The hamburger is still fried. Adults don’t want a mayonnaise-based sauce. Adults don’t want “gunk” on their hamburger. Increasingly health-conscious adults don’t want

another high-fat, high-calorie hamburger. The concern about frying presents the biggest

challenge for McDonald’s because fixing this problem would require a change in the way the company cooks its hamburgers.

Major changes in their operations. Impact on company goals, consistency and speed.

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The Arch Deluxe launch The campaign really offers an “anti-position:” The Arch

Deluxe is a sandwich that kids don’t like. The lack of product emphasis will probably also be a

problem for franchisees, who have a history of complaining about ad campaigns that do not focus on products.

For many operators, there was too much McDonald’s personality coming through and not enough McDonald’s product.

Given this history, the franchisees would be less than happy with the lack of product focus in the Arch Deluxe ads.

McDonald’s has introduced the Arch Deluxe with the stated goal of inviting adults back to McDonald’s.

More simply, given a choice, many adults don’t want to eat in a place that is strongly associated with a clown.

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Law of sacrifice You have to give up something in order to

get something Positioning to one segment often means

sacrificing another segment

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Consumer behavior: How would you segment the market for fast food?

Skills and resources that make McDonald’s such a difficult competitor in some segments limit the firm’s ability to compete effectively in other segments. In particular, McDonald’s is always going to have a difficult time competing for adults who want a relaxing meal with other adult friends.

McDonald’s has done a very good job of positioning themselves to consumers in certain consumption situations (adults with children). The process of making their restaurants attractive in those consumption situations simultaneously makes the restaurant less attractive in other consumption situations.

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Recommendation The proper goal for the Arch Deluxe should

not to “invite adults back to McDonald’s,” but to target adults accompanied by children and convince those adults to substitute the Arch Deluxe for other, lower-margin sandwiches like the Big Mac or the Quarter- Pounder with Cheese.

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What Happened In mid-August McDonald’s introduced a new Arch Deluxe

advertisement that starred Andrew Selvaggio, the creator of the Arch Deluxe. The spot focuses on the ingredients of the new product like a soft potato-flour roll, a mustard-mayonnaise sauce and an optional slice of bacon.

Those attributes are lovingly described by the creator of the Arch Deluxe, Andrew Selvaggio, the executive chef for McDonald’s. He builds a sandwich on camera with the same self-confident flair he exhibited at a glitzy news conference May 9 at Radio City Music Hall; at one point he exclaims, “I’m in the zone!”

Two commercials run, One showed basketball star Grant Hill rejecting a young player who had never tried an Arch Deluxe.

In the second, an old man picking up trash keeps muttering, “darn kids” until he picks an Arch Deluxe wrapper, when he mutters, “darn grown-ups.”

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What Happened On September 19, 1996, the New York Times

reported that: In an unusual move, the head of the McDonald’s

Corporation has sent a memorandum to the company’s 2,700 United States franchisees defending the introduction of the Arch Deluxe, saying that the sandwich was “never intended to be a silver bullet

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What Happened On September 26, McDonald’s introduced three

Arch Deluxe line extensions: the Crispy Chicken Deluxe, the Grilled Chicken Deluxe, and the Fish Filet Deluxe. From teens to seniors, our customers are telling us that

we’re really on to something with our new ‘grown-up’ taste

Deluxe line features premium products with a heartier, more robust taste. As the customers in our test markets have told us, it’s a grown-up taste that will keep them coming back