Brand Extension: Growing the McDonald’s

Brand

AKSHIT JAIN 15BSP0140

Akansha Bhambri

Agenda

Evolution & About McD Timeline Product Mix E-Presence Challenges McD’s Way Conclusion

Evolution of McDonald’s

About McDonald’s McDonald's was started as a drive-in restaurant by two

brothers, Richard and Maurice McDonald in California, US in 1937.

The business, which was generating $200,000 per annum in the 1940s , got a further boost with the emergence of a revolutionary concept called 'self-service.

Speed, service and cleanliness became the critical success factors of the business.

By mid- 1950s, the restaurant's revenues had reached $350,000.

Today it is the world's largest chain of fast food restaurants Today it serves around 68 million customers daily in 119

countries across 36,538 outlets

Timeline

1937 – Drive-thur restaurant – The Airdome on route 66, California 1940 – Renamed as McDonald’s 1943 – Ronald McDonald character was created 1961 – Rights sold to Ray Kroc for $2.7 million 1962 – First McD’s with seating opened in Denver 1963 – 1 billion burgers sold with 500 total restaurants 1971 – McDonald’s expand globally 1979 – Happy meal was introduced 1997 – McFlurry was invented 2003 – The iconic I’m Lovin’ it campaign 2015 – Steve Easterbrook become CEO; announced widespread

reform plan

McD’s Indian Timeline

1996

1st McDonald’s opened in Delhi, India.1st McD in the world

to not serve beef and pork based

products1997

1st Drive -Thru restaurant at Noida.1st disabled friendly

store at Noida.

2000

1st highway McD at

Mathura

200420062003

I’m lovin’it

worldwide campaign

2008

1st 24hrs McD

2012

McEgg

2013

McBreakfast

McDelivery

100th McD restaurant

opened

Product Mix

SOCIAL MEDIA GIVES TREMENDOUS RESPONSES & HELPS IN BRAND BUILDING &

EXTENSION

Facebook

YouTube

Twitter

Challenges

Challenging environment

Global health concernMarket saturation, and a slumping economy

Culture differences

McDonald's Way

To overcome these, the company has employed a number of different growth

strategies that can be classified using the Ansoff’s growth share matrix

Company extended its offering by leveraging its brand

Introduced new products based on local culture

Brand Extensions – Advantages

Facilitate New Product acceptance Improve brand image Reduce risk perceived

by the customers Increase efficiency of

promotional expenditures

Avoid cost of developing a new brand

Permit consumer variety-seeking

Feedback benefits to the parent brand and company

Clarify brand meaningEnhance the parent

brand imageBring new customers into

the brand franchise and increase market coverage

Revitalize the brandPermit subsequent

extensions

Brand Extensions – Disadvantages

Can confuse or frustrate consumers

Can fail and hurt parent brand image

Can succeed but diminish identification with any one category

Can dilute brand meaning

Can encourage retailer resistance

Can succeed but cannibalize sales of parent brand

Can succeed but hurt the image of parent brand

Can cause the company to forgo the chances to develop a new brand

Market Penetration

Strategy

Product Development Strategy

Market Development Strategy

Diversification Strategy

Ansoff’s Growth MatrixCurrent Products New Products

Current Market

New Market

Generating greater returns on existing

restaurants.“Better, not bigger”

Over 33,000 restaurants served

64 million customers everyday.

Adapted to local cultural preferences

Launched McCafé, a gourmet coffee

shop, McTreat, an ice cream and dessert shop

Added healthier options like fresh

salad, kids’ healthier happy

meal and pedometer

Consumer Based Brand Equity Model

• Rewards/Indulges me• Let’s me be myself

McDonalds:Connections across segments

• Sets the pace• Reflects my

own style/personality• Convenient locations

• Easy dining• Affordability

Result

Company’s Financial fortunes rebounded

McDonald’s outperformed many of its peer in revenue growth

Brand credited with producing a “driving growth for the entire quick-service restaurant category”

Conclusion

Successful brand extension occurs when the parent brand is seen having favorable associations and there is a perception of fit between the parent brand and the extension product

A brand that is seen as a prototypical of a product category can be difficult to extend outside the category

An unsuccessful extension does not prevent a firm from backtracking and introducing a more similar product.

Cultural differences across markets can influence extension success

Tips

• Brand-attribute associations can both help and hurt an extension. It is

important to understand the obvious and subtle associations and their potential to be transferred to the extension.

• Perceived brand quality is important to an extension. It pays to

develop and maintain a quality reputation, but only if there is a basis of fit with the extension. Even a high-quality brand name cannot be extended everywhere.

• Placing a strong name on a trivial product class, even if it fits (i.e.,

Heineken popcorn), is risky. Customers may feel it is incongruous, overpriced, or both.

• Two dimensions of fit that work are the perceived ability to make the product extension and the perceived product class complementarity.

Summary Brand extension occur when a firm leverages an established brand name to

introduce a new product The extension’s ability to establish its own brand equity depends on the salience

of consumers’ associations with the parent brand in the extension context and the favorability and uniqueness of any associations they infer

To evaluate extension opportunities: Define actual and desired consumer knowledge about the brand Identify possible extension candidates Evaluate the potential of extension candidates Design marketing programs to launch extensions Evaluate extensions success and effects on parent brand equity