The purpose of this report is to apply your knowledge of marketing to McDonalds (a well known international fast food chain). Your report should explain the concepts of marketing and illustrate segmentation, targeting and positioning using one of their products. Finally, you will analyse their marketing and devise a marketing mix for one of their products.
Your report should answer each of the following questions in turn:
Task 1 – Investigate the concept and process of marketing (LO1)
1 (A). Compare alternative definitions of marketing. You should use the key words from the definitions to formulate your own definition.
The Chartered Institute of Marketing defines marketing as: ‘The management process that identifies anticipates and satisfies customer requirements profitably’
Philip Kotler defines marketing as ‘Marketing is the social process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others’
Definition be Chartered Institute of Marketing
Definition by Philip Kotler
Relatively being CONCISE and SUCCINCT,
With a balance of WHAT MARKETERS DO (“the management process”),
WHO IT’S ABOUT (“customer requirements”)
And WHY THEY DO IT (“profitably”),
Although the last aspect does ignore much marketing that takes place for reasons that are not about profit, such as in the public and voluntary sectors.
Being fairly BRIEF and TO THE POINT,
With a STABILITY of a PROMOTION DEVELOPMENT (“the social process”) and
To ATTAIN PROCESS of PERSONAGE and FACTIONS (“by which individuals and groups obtain what they need”)
By the means of PRODUCING and BARTERING THE ITEMS for CONSUMPTION REVIEWING THEM “creating and exchanging products and value with others”
1(B). Identify the main characteristics of a marketing oriented organisation and explain if you think McDonalds exhibit these characteristics.
The major attribute/ features of a marketing oriented business are:
They are aimed to stay closer to the customers and;
Ahead of their competitors, the reason is that the basic aim of these organizations is to attract the customers.
There are four major characteristics which define the marketing oriented organizations which include,
At first, all decisions of these companies consider the customers first and also they share the common value of greater quality of the produced goods. Second, their organizational structure has very few layers and their policies are not very difficult. Next, the strategy of a market oriented organization is long term, elastic and participative. Finally, they consider the expectations of the stakeholders before making any important decision.
Does McDonalds exhibit these characteristics?
If we look at the Marketing strategy of McDonalds, it’s perfectly clear that this particular organization is using the four major characteristics of the marketing oriented business i-e shared values, organization structure, strategy and stakeholders.
1 (C). Compare the selling concept with the marketing concept- which one best describes McDonalds?
The Selling Concept and the Marketing Concept are two fairly different models of ”Marketing” that are related to the evolution and advancement of marketing in the present world.
The ”Selling Concept” holds that in order for the firm to be lucrative and cost-effective, it has got to place sales of the product as center of attention regardless of the orientation of the product itself.
In contrast to selling concept, the ”Marketing Concept” is one of the most recent concepts in the vast field of marketing. It holds that a business organization must know/ recognize the needs of the consumer and then plan, price, promote and distribute its product according to the demands of the consumer.
Which concept best describes McDonalds?
The concept which describes McDonalds best is the ”Marketing Concept” as they also identify the needs of the customer and after that they Plan, Price, Promote & Distribute the produce as per the demands of the end-user
1 (D). Identify and assess the benefits and costs of implementing a marketing approach to McDonalds.
Firstly we have to point out the elements relayed to these two:
Benefits: The benefit of marketing is to grow your business.
Cost: The cost of marketing is the outflow of funds with no guarantee of returns.
Benefits and costs are further divided into important elements that are:
Marketing cost has the following factors append to it:
Regular Marketing Research requires funds for it to be conducted.
Setting marketing focus structure also needs investment.
Initial product development cannot be done without investment being done in R&D.
Building excellent services requires time and money.
Attracting attentions of customers can be done through events and happenings which cost money.
If a company, an individual or a group of companies desires for building long-time relationships with Customers, Suppliers and Distributors too then they need to invest into these parts of the business.
Customer retention needs customer relationship management and customer experience management done in a right manner, and both these factors need proper consideration and capital to run.
In conjunction with costs, there are benefits of marketing too.
Profit maximization is one aspect of the benefits of marketing i-e
More awareness=more sales=more profit
When capital is invested in customer relationship management then customers become devoted to that brand resulting in brand loyalty and trustiness in that single brand.
Marketing helps an organization achieve long term goals and meet the targets.
It creates reputation of the organization.
Task (2) – Explore the concepts of segmentation, targeting and positioning (LO2)
2(A). Identify and explain the relevance of 2 macro and 1 micro environmental factor to marketing undertaken by McDonalds.
The term micro-environment denotes ”those elements over which the marketing firm has control or which it can use in order to gain information” that will better help it in its marketing operations. In other words, these are elements that can be manipulated, or used to glean information, in order to provide fuller satisfaction to the company’s customers.
These are internal factors close to the company that have a direct impact on the organisations strategy. These factors include:
Customer Factor: McDonald’s uses demographic segmentation strategy with age as the parameter.
The main target segments are children, youth and the young urban families. Customer perception also is a key factor affecting a product’s success. Many potentially innovative products have failed just because of their lack of ability to build a healthy perception about themselves in the customers’ minds. McDonalds being an internationally renowned brand brings with it certain expectations for the customers.
The term macro-environment means all forces and agencies external to the marketing firm itself. Some of these forces and agencies will be closer to the operation of the firm than others, e.g. a firm’s suppliers, agents, distributors and other distributive intermediaries and competing firms. These ‘closer’ external constituents are often collectively referred to as the firm’s immediate macro-environment to distinguish them from the wider external forces found, for example, in the legal, cultural, economic and technological sub-environments.
The external factors which affect a company’s planning and performance, and are beyond its control: for example, socio-economic, legal and technological change.
Technological Change: McDonald has been McDonaldizing the Suppliers.
McDonald’s has changed the nature of not only the food service industry but also the food processing industry as well. McDonald’s realized that the battle between fast food chains would increasingly be one of efficiency of supply, lower cost production and greater desire to innovate. It pioneered with innovative and sophisticated food distribution and packaging systems when the traditional food processors were unwilling or unable to supply food items that McDonald’s demanded. They achieved amazing consistency by devoting more attention than anyone else to field service and training at store level. Production was concentrated in huge plants devoted exclusively to McDonald’s. McDonald’s also started with tiny suppliers and grew with them displaying great loyalty.
Nowhere is the supplier loyalty more evident than in development of new, improved products. Some of McDonald’s classic food items like Filet-o-Fish, French Fries, and Chicken Nuggets etc. are results of supplier innovation. Interestingly, it took KFC more than three years before in finally introduced its own version of chicken nuggets. Thus supplier technological expertise had given McDonald’s a product which was not a mere marketing innovation but a technical one. McDonald’s attempted to squeeze labor out of the stores moving more preparation back into the processing plant, creating the opportunity to develop unique products based on suppliers’ processing skills. For the first time, McDonald’s suppliers became the focal point of new product development. This converted the fast-food industry’s most fragmented distributed system into more efficient one which helped McDonald’s reduce its inventory and manage costs effectively
The culture mainly consists of set of shared attitudes, values, goals, and practices that characterizes an institution, organization or group. It is important so that the product is available to the customer at the right place, at the right time and in the right quantity. There is a certain degree of fun and happiness that a customer feels each time he dines at McDonalds. There are certain value propositions that McDonalds offer to its customers based on their needs. McDonalds offers hygienic environment, good ambience and great service. Now McDonalds have also started giving internet facility at their centers and they have been playing music through radio instead of the normal music. There are certain dedicated areas for children where they can play while their parents can have some quality time together
2(B). Propose 3 segmentation criteria and explain how McDonalds could use these criteria to segment the market for one of its products.
What is Market Segmentation?
Market segmentation is a method of dividing the market into groups of buyers, where each group sees the product differently. The process of splitting customers, or potential customers, in a market into different groups, or segments, within which customers share a similar level of interest in the same or comparable set of needs satisfied by a distinct marketing proposition.
What is Segmentation Criteria?
Segmentation criteria can be arbitrarily complex and may take into account global as well as local criteria. A common requirement is that each region must be connected in some sense.
Kotler mentions five criteria for an effective segmentation:
Measurable: It has to be possible to determine the values of the variables used for segmentation with justifiable efforts. This is important especially for demographic and geographic variables. For an organization with direct sales (without intermediaries), the own customer database could deliver valuable information on buying behavior (frequency, volume, product groups, mode of payment etc).
Relevant: The size and profit potential of a market segment have to be large enough to economically justify separate marketing activities for this segment.
Accessible: The segment has to be accessible and servable for the organization. That means, for instance, that there are target-group specific advertising media, as magazines or websites the target audience likes to use.
Distinguishable: The market segments have to be that diverse that they show different reactions to different marketing mixes.
Feasible: It has to be possible to approach each segment with a particular marketing program and to draw advantages from that.
Market Segmentation for McDonalds – ”McVeggie Burger”:
McDonald’s should use demographic segmentation strategy with age as the key parameter. The proposed target segments are children, youth and the young urban family.
2(C). State the target market you would choose for this product and explain why you think this target market would be attractive to McDonalds.
What is McDonald’s for them?
A Family with children
A treat to children, a fun place to be for the children
Urban customer on the move
Great taste, quick service without affecting the work schedule
Hang out with friends, but keep it affordable
UK has a huge population of vegetarians which include customers from all the ethnicities. To cater to this customer segment, the company came up with a completely new line of vegetarian items like McVeggie burger. The separation of vegetarian and non-vegetarian sections is maintained throughout the various stages. Also in 2011 McDonalds is launching a new choice of burgers named McAlooTikki (McD’s Potato Cutlets) which is going to be a fine addition in the vegetarian menu.
2(D). Explain how McDonalds should take account of buyer behavior in their marketing activities.
A Counterargument on Market Segmentation:
McDonalds has to understand and analyze the fact that customers segment themselves and take no notice of how companies segment their market(s). When choosing between competing products and services, customers select the proposition that meets their needs better than any other. To win market share, therefore, a company must ensure that their offers meet these needs better than any other at a price they perceive as providing superior value for money (which does not necessarily mean it has to be the cheapest). As this is how customers operate in a market, then a segmentation project should have these as its segmentation criteria.
Buyer Behavior of McDonalds’ Customer:
McDonalds has intentionally kept its product depth and product width limited. McDonalds studied the behaviour of the Pakistani and/or Indian customers before launch and provided a totally different menu as compared to its International offering. It dropped ham, and Non-Halal beef and mutton burgers from the menu. India is the only country where McDonalds serve vegetarian menu only. Even the cheese and sauces used in India are 100% vegetarian. McDonalds continuously innovates its products according to the changing preferences and tastes of its customers. McDonalds bring with it a globally reputed brand, world class food quality and excel lent customer specific product features
Task 3- Identify and analyse the individual elements of the extended marketing mix. LO3
3(A). Analyze how McDonalds gain competitive advantage through their products.
McDonald’s outlet in Clifton Karachi (Pakistan) is the leading and the most revenue generating outlet in the Asia. But the time has come that McDonalds competitors are rising up and eating away into its market share. In addition to its traditional rivals-KFC, Dominos, Pizza Hut-the firm encounters new challenges. Jumbo King competes using a back-to-basics approach of quickly serving up burgers for time-pressed consumers. On the higher end, the KFC has become potent competitor in the quick service field, taking away customers from McDonald’s. Perhaps in the new environment, fast, convenient service is no longer enough to distinguish the firm. At this time, a new critical success factor may be emerging: the need to create a rich, satisfying experience for consumers. This brings us to service and experience based competition which McDonald’s can use for competitive advantage against Jumbo King. Keeping in mind the demographics of the area, McDonald’s has Wi-Fi enabled the outlet to cater to the student community? It is for this overall “Food, Fun & Folks” experience that customers pay a premium over the other competitors.
3(B). Critically evaluate the distribution strategy used by McDonalds for their products. Suggest ways in which it could be improved.
The distribution channel is an important part of an organization. It is important so that the product is available to the customer at the right place, at the right time and in the right quantity. There are certain value propositions that McDonalds offer to its customers based on their needs. McDonalds offers hygienic environment, good ambience and great service. Now McDonalds have also started giving internet facility at their centres and they have been playing music through radio instead of the normal music. There are certain dedicated areas for children where they can play while their parents can have some quality time together.
3(C). Explain how the prices set by McDonalds reflect their objectives and market conditions.
Pricing is an important aspect in any fast food retailers business, the discount functions available, the financing options available etc. It should also take into the consideration the probable reaction from the competitor to the pricing strategy. This is the most important part of the marketing mix as this is the only part which generates revenue. All the other three are expenses incurred. The price must take into consideration the appropriate demand-supply equation. McDonald’s in Pakistan came up with a very catchy punch line “Aap ke zamane mein ,baap ke zamane ke daam” (As cheap as your Dad would have got in his age). This was to attract the middle and lower class consumers and the effect can clearly be seen in the consumer base McDonalds has now. McDonalds has certain value pricing and bundling strategies such as happy meal, combo meal, family meal etc to increase overall sales volume.
3(D). Comment on the effectiveness of their promotional strategy in helping McDonalds to meet their marketing objectives for their products.
The various promotion channels being used by McDonald’s to effectively communicate the product information are given above. A clear understanding of the customer value helps decide whether the cost of promotion is worth spending.
There are three main objectives of advertising for McDonald’s are to make people aware of an item, feel positive about it and remember it. The right message has to be communicated to the right audience through the right media. McDonald’s does its promotion through television, hoardings and bus shelters. They use print ads and the television programs are also an important marketing medium for promotion.
Some of the most famous marketing campaigns of McDonald’s are:
“You Deserve a break today, so get up and get away- To McDonald’s”
“Food, Folks, and Fun”
“I’m loving it”
Task 4 Apply the extended marketing mix to different marketing segments and contexts. (LO4)
4(A). Choose a McDonalds product and devise two marketing mixes for the product. Start your marketing mix by outlining the target markets the product is aimed at.
After segmenting the market, finding the target segment and positioning itself, we have found out that each organization needs to come up with an offer. The 5 P’s that to be used by McDonalds are:
Out of these 5 we’ll use two i-e ”Place” and ”People”
McDonald’s understands the value of both its employees and its customers. It understands the fact that a happy employee can serve well and result in a happy customer. McDonald continuously does Internal Marketing. This is important as it must precede external marketing. This includes hiring, training and motivating able employees. This way they serve customers well and the final result is a happy customer. The level of importance has changed to be in the following order (the more important people are at the top):
Front line employees
Middle level managers
Front line managers
The punch line “I’m loving it” is an attempt to show that the employees are loving their work at McDonalds and will love to serve the customers.
The place mainly consists of the distribution channels. It is important so that the product is available to the customer at the right place, at the right time and in the right quantity. Nearly 50% of U.S.A is within a 3 minute drive from a McDonald’s outlet. There is a certain degree of fun and happiness that a customer feels each time he dines at McDonalds. There are certain value propositions that McDonalds offer to its customers based on their needs. McDonalds offers hygienic environment, good ambience and great service. Now McDonalds have also started giving internet facility at their centres and they have been playing music through radio instead of the normal music. There are certain dedicated areas for children where they can play while their parents can have some quality time together.
4(B). Explain the differences in marketing products and services to organizations rather than consumers.
Marketing products and services to an organization is different due to the fact that those within an organization are usually employees of their assigned departments. This changes the atmosphere to where you will be using more facts and hard data to present in your advertisement. While a visual element will still be used, the photography and artwork usually will want to relate to the reward a organization will receive for doing business with the advertiser. In an organization value and necessity are core concepts you want to implement.
When marketing to an organization your segment will go into department channels as well as will need to target and address the proper decision makers.
Consumer products and services have a greater focus on creating desires and needs in a more social and less formal fashion. Hard facts may be good to present to the consumer but a focus more on simple functions and social status become core concepts in the consumer market. Demographics and key market channels can be less complex in the consumer market. This in part is due to technology in today’s media environment allowing better statistics on segmented marketing channels.
4(C). Explain how and why international marketing differs from domestic marketing for McDonalds.
With advertising concepts being developed with the global market place in mind, many corporations are developing products and services geared for international customers. McDonald’s is now a global corporation in 119 countries and an example to follow for corporations trying to make the global transition. With advertising concepts being developed with the global market place in mind, many corporations are developing products and services geared for international customers. McDonald’s is now a global corporation in 119 countries and an example to follow for corporations trying to make the global transition. Leading the way in this trend is McDonald’s. By accommodating the tastes of the variety of culturally diverse customers, McDonald’s has succeeded in stepping into the global marketplace.
McDonald’s has over 31,000 restaurants worldwide in 119 different countries. With this kind of distribution the demographic variations must be staggering. McDonald’s is in the process of streamlining their restaurants to cater to the types of people who most likely to be customers in each individual nation. By tailoring their menus and restaurants to seamlessly integrate them into the social standards within each nation, they have succeeded in globalizing their corporation.
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