Mcdonald'S: The Arch Deluxe Launch (Condensed)

19 Pages Posted: 16 Jun 2009

See all articles by Mark E. Parry

Mark E. Parry

University of Missouri at Kansas City - Department of Organizational Leadership/Marketing

Yoshinobu Sato

University of Marketing and Distribution Sciences

Abstract

In 1995 McDonald's was the largest restaurant chain in the United States with domestic sales of almost $15.9 billion. McDonald's was also the country's fourth-largest advertiser, spending $490 million on measured media in 1995. On May 9, 1996, the company introduced the Arch Deluxe, a quarter-pound hamburger that was the first in a planned series of sandwiches targeted to adults. By the end of May, McDonald's had sold or given away 100 million Arch Deluxe burgers. Despite this success, in the second quarter of 1996 some store sales at McDonald's restaurants declined slightly from the same quarter in the previous year. Thus McDonald's faced several key decisions. Should the Arch Deluxe burger be modified? What changes, if any, should be made in the marketing campaign? Should McDonald's proceed with plans to introduce fish and chicken line extensions?

Excerpt

UVA-M-0575

MCDONALD'S: THE ARCH DELUXE LAUNCH (CONDENSED)

In 1995 McDonald's was the largest restaurant chain in the United States with domestic sales of almost $ 15.9 billion. McDonald's was also the country's fourth-largest advertiser, spending $ 490 million on measured media in 1995. On May 9, 1996, the company introduced the Arch Deluxe, a quarter-pound hamburger that was the first in a planned series of sandwiches targeted to adults. By the end of May, McDonald's had sold or given away 100 million Arch Deluxe burgers. Despite this success, in the second quarter of 1996 same store sales at McDonald's restaurants declined slightly from the same quarter in the previous year. Thus McDonald's faced several key decisions. Should the Arch Deluxe burger be modified? What changes, if any, should be made in the marketing campaign? Should McDonald's proceed with plans to introduce fish and chicken line extensions?

McDonald's

In 1948 Maurice and Richard McDonald opened the first self-serve McDonald's in San Bernardino, California. Six years later Ray Kroc, a milkshake machine salesman, convinced the brothers to let him become their franchising agent. In 1961 Kroc paid $ 2.7 million for the brothers' share of McDonald's System, Inc. To raise money for expansion, Kroc took the company public in 1965. By the time of Kroc's death in 1984, the company had 7,500 restaurants in 32 countries. By 1995, the number of McDonald's restaurants exceed 16,000, with more than 10,000 located in the United States.

U.S. expenditures on fast food in 1995 totaled nearly $ 93.9 billion. According to the market research firm NPD CREST, each year Americans made 30 billion visits to fast-food restaurants. Adults aged 35 and older accounted for 44 percent of these visits, while children under 17 accounted for 23 percent. McDonald's was ranked as the top-selling hamburger chain, followed by Burger King (BK) and Wendy's (see Exhibit 1). Each day, seven percent of Americans ate at McDonald's. Frequent consumer, who accounted for 75 percent of U.S. sales, visited McDonald's at least twice a week and tended to be male, aged 15 to 35. Exhibits 2 and 3 provide additional information regarding McDonald's performance.

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Keywords: advertising strategy, new product introduction, product positioning

Suggested Citation

Parry, Mark E. and Sato, Yoshinobu, Mcdonald'S: The Arch Deluxe Launch (Condensed). Darden Case No. UVA-M-0575, Available at SSRN: https://ssrn.com/abstract=1420565 or http://dx.doi.org/10.2139/ssrn.1420565

Mark E. Parry (Contact Author)

University of Missouri at Kansas City - Department of Organizational Leadership/Marketing ( email )

5110 Cherry St.
Kansas City, MO 64110
United States

Yoshinobu Sato

University of Marketing and Distribution Sciences ( email )

Kobe 651-2188
Japan

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