McDonalds Pricing Strategy

McDonalds
The world largest hamburger chain and one of the worlds best known brands with over 34,000 store,1.7 Million employee,119 countries. Low-priced meals, which made eating out on a regular basis affordable for families Ray Kroc, the founder of McDonalds Corporation, based his empire on the fundamental principles of Quality, Service, Cleanliness and Value (Q.S.C. & V.) McDonalds adopts two operating models: company operated franchisees(80%) and affiliated restaurant outlets in domestic as well as international markets In foreign countries McDonalds offered menu items with distinctively local flavors to appeal to the taste of locals

Industry analysis

Strong Brand identities, High R&D cost, Extreme price competition from established brands

Main ingredients are easily available (low)

Extreme competition from strong brand identities : KFC, BKC, Pizza outlets

Low when there is brand loyalty;(but overall market is price sensitive and has low switching costs)

Beverages, dairy products, roundthe-corner fast food outlets

Competitors analysis
The fast food industry is a mature, but highly competitive industry The industry is dominated by a few major restaurants: Burger King Corporation, KFC, Pizza Hut, Dominos etc Fast, convenient service no longer enough to distinguish the firm. New critical success factor is the need to create a rich, satisfying experience

Target Segment A Family with children Urban customer on the move Teenager

What is McDonalds for me? A fun place to be for the children Great taste, quick service without affectin g the work schedule Affordable hangout with friends

PERCEPTUAL MAPPING

Product Line
EXTRA VALUE MEALS HAPPY PRICE MENU BREAKFAST MENU HAPPY CORE MEALS MENU McCHICKEN MEAL MAHARAJA McMEAL FILET-O-FISH MEAL CHICKEN McNUGGETS MEAL Mc ALOO TIKKI CHICKEN McGRILL SALAD SANDWICH COKE FLOAT VEG PIZZA McPUFF POTATO WEDGES HOT CAKES SAUSAGE McMUFFIN WITH EGG HASH BROWN VEG McMUFFIN

McVEGGIE McCHICKEN CHICKEN MAHARAJA MAC FILET-O-FISH McCHICKEN VEG PIZZA McPUFF BEVERAGES DESSERTS

PRICING STRATEGY
The customers perception of value is an important determinant of the price charged since it is an impulsive buy The danger of using low price as a marketing tool is that the customer may feel that quality is being compromised Price should reflect the brand and its integrity

MCDONALDS MULTI-TIERED PRICING STRATEGY

Branded affordability products :Value positioning
Happy Price menu- aggressively targets low price points with items starting at just Rs 20 Target : Students, young people and other low-income groups

Branded core value products

Core Menu and Extra Value Meal offerings Target: Middle class families with children and other higher-income groups.

New premium category

Recently added Spicy menu, featuring sandwiches and wraps with bigger, thicker portions of chicken and paneer cheese, fried in a crunchy, spicy coating Target: Higher-income consumers looking for a full meal, and willing to spend anywhere from Rs 200 to Rs 300 per person

Product Line Pricing

Product line pricing A range of products or services where in the pricing reflects the benefits of parts of the range. McDonalds has a unique pricing strategy that falls solely on their many product lines. Their Value Meals fall into the category of Product Line Pricing

Eg: Mc Chicken Burger Value Meal

Price bundling

In this strategy different offerings are sold together at a price thats typically lower than the total price a customer would pay by buying each offering separately. Eg: Value meals at McD With one package deal the customer is likely to focus on the total experiential value and perceive greater total value. Induces customers to purchase products that they may not have otherwise. Happy meal: Small burger, Fries, Coke and a toy Medium meal combo: burger, fries, coke Rs. 75 Maharaja Mac meal: Rs. 95 Family dines under Rs. 300

Value Pricing
In this strategy the product is priced based on the value it creates for the customer. This approach is used where external factors such as fierce competition forces companies to provide value products and services to retain sales. This is usually the most profitable form of pricing, if one can achieve it. McD introduced the Happy Price menu of Rs. 20 as its most economical product line so far Launched to convey a value message for a younger audience. For the first time McDonald's India saw a surge of younger consumers and people from socioeconomic class B patronizing their stores Helped retain sales even during the slowdown and had in turn helped increase pressure towards competitors Happy Price menu priced at Rs. 20 Aap Ke zamane mein baap ke zamane ka daam

Promotion pricing

It is a short-term tactic which involves reducing prices to unsustainably low levels. Interest in goods can be greatly increased dramatically McD promotion changes weekly and may consist of different menu items packaged together
Frozen Strawberry Lemonade drink is a

new product launched this summer

ThirstyThursdays for the rest of the month with free samples being distributed between 11 am 2 pm and 4 pm 7 pm

How McDonalds manages to keep its prices down?

Bulk buying Long-term vendor contracts Manufacturing efficiencies.

Porters Value Chain Analysis

Inbound Logistics Operations Outbound Logistics Marketing and Sales Services

Sources

N. Vijayarani, McDonalds Business Analysis Amber Zirnhelt, McDonalds Analysis McDonalds Customer Acquisition and Retention analysis Documentary on McDonald. Survey from Franchise(Vile Parle,mumbai ).

Thank You

Bye Bye