Mcdonald'S: The Arch Deluxe Launch

Abstract

Students evaluate McDonald's new Arch Deluxe hamburger, targeted to adults, including the launch program and the underlying marketing strategy in light of the company's skills, resources, and brand position.

Excerpt

UVA-M-0503

McDONALD'S: THE ARCH DELUXE LAUNCH

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. In the spring of 1996 the company was preparing to introduce the Arch Deluxe, a quarter-pound hamburger that was the first in a planned series of sandwiches targeted to adults. It had budgeted $ 70 million for the launch campaign, which would be handled by Fallon McElligott, small Minneapolis-based agency that had won a string of advertising awards in recent years. As McDonald executives, met with their agency counterparts, they wondered what message the launch advertisements should communicate to the target audience.

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 diners, 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 recent performance.

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Keywords: UVA-M-0503, market segmentation brand management entrepreneurship product positioning service industry