ABSTRACT
McDonald's is a food- service retailing outfit founded on 15th May 1940 by Dick and Mac McDonald. She is arguably the number one in the global food-service retailing business. The McDonalds brand is synonymous with quality, cleanliness, service and value for every customer anytime. Pizzas are undoubtedly one of the most popular dishes worldwide and it is on McDonald's menu and goes by the product name McPizza. McPizza comes in various sizes, from the average sized 10 inch pizza to the giant sized 24 inch size. This project discusses in detail, the process of marketing the product.
INTRODUCTION
McDonald's is a food- service retailing outfit founded on 15th May 1940 by Dick and Mac McDonald. In 1955, the restaurant became a corporation following Ray Kroc’s takeover. She is arguably the number one in the global food-service retailing business with over 33,000 restaurants in 119 countries and an estimated 68 million customers. The company’s main menu include; Hamburgers, chicken, french-fries, soft drinks, milkshakes, salads, ice cream and breakfast. The McDonalds brand is synonymous with quality, cleanliness, service and value for every customer anytime.
Pizzas are undoubtedly one of the most popular dishes worldwide. It is an oven baked round bread covered with tomatoes or a tomato based-sauce and mozarella cheese. Toppings could be added depending on individual preference, culture or religion. Naples , in Italy ,is believed to be the birthplace of pizzas, hence the believe that the best tasting pizzas are Italian. Pizza Margherita, Pizza Marinara and Pizza Quattro Stagioni or the ''four season’s pizza'' are some of the traditional pizzas from Naples. Though so many types exist now, they are categorized by many as fast food, which is seen as lacking in nutritional value. Though the pizza industry has no specific seasonality, there are special occasions that generate monumental sales. They are the; Super bowl Sunday, New years eve, Halloween, Thanksgiving eve and New year’s day. Americas increasing aging population has caused the awareness in health related issues to soar. Many fast food operators are therefore introducing ''low fat ''low calorie'' products. Despite the large cries about unhealthiness of fast foods, food service sales were a staggering $320 billion in 1997 in the United States of America. The United States restaurant industry grew by 5.2% in 1997. The major segments of the fast food segment of the of the food service industry include; the sandwich chains ,like McDonalds and Wendys, they occupy the first segment, closely followed by dinner houses, like Applebees and Red Lobster. The Pizza segments, like Pizza hut and Dominos are ranked third.
Out of the pizza chains, pizza hut has the biggest market share of 46%, closely followed by Dominos with 21.7%. The entry of McDonalds into the pizza chain would create an interesting scenario. McDonalds strengths are numerous. A strong brand name is the greatest of them all. Customers are well accustomed to the name, the values and quality products churned out over the years by the company. Another plus on McDonalds side is that they have a full service restaurant. Of all the competitors in the pizza business , only pizza hut have restaurants scattered across the globe. This encourages eating in these restaurants by families and friends. Also, their delivery service is second to none in the industry. Though, most of the top pizza companies offer free delivery, coupled with frequent promotional deals offering large pizzas at incredibly reduced prices. To market McDonals pizza, the ''McPizza'' the marketing mix, which are combinations of marketing tools are employed. They are; price, product, place and promotion.
McPizza comes in various sizes, from the average sized 10 inch pizza to the giant sized 24 inch size. It is moderate on toppings, sauce and cheese to reduce its cholesterol content and increase its nutritional value. It is targeted at the young, the middle aged and the aged. The low fat and cholesterol will reduce the risk of obesity in the young as well as atheroslcerosis in the middle aged and the aged. McDonalds over the years has built a strong brand name which to the consumers is synonymous with strength, high quality products and services, strong values, experience and reliability. Hence, consumers are assured of another exciting product from McDonalds.
Packaging of McPizza is an essential part of the marketing process. McPizza would be packaged in colorful paperboards with conspicuous McDonalds logos on it. The paperboards are strong, durable, heat resistant and bio-degradable.
The McPizza box is labeled. The label is attached to the packaging and placed in a conspicuous place, indelible, written clearly and easily understood information are written on it. Also, the information would not be obscured by a price tag. The list of ingredients, durability information, storage conditions, name and address of the manufacturer are all included on the label.
PROMOTION
These are decisions related to communicating and selling McPizza to potential consumers. The promotion decisions include advertising, sales promotion, personal selling and public relations. Promoting McPizza serves to introduce the new product, change the short term behavior of consumers, and stimulate demand and to encourage frequent usage by customers.
Advertising involves building general awareness about McPizza, inquiries about the product, encouraging attitudinal change from ''high fat'', ''high cholesterol'' pizzas produced by other pizza producers to the ''low fat, low cholesterol'', healthy McPizza.
Since the targeted market segment are the generality of the population, advertising campaign would be expensive compared to previous products. Five percent of the projected sales is budgeted for advertisements. Introduction of McPizza is expected to increase McDonals sales by about 10%, this brings a total of about $800 million in revenues, leaving about $40 million for adverts. This forecast is based on the past new products introduced and the instantaneous impacts made in the market. This adverts will be targeted at three main groups; the teens, the youths , and the elderly. Adverts for this group will contain scenes that appeal to the youths, such as; adrenaline pumping events, fast racing cars, sporting events like basketball, baseball ,extreme sports and football. Adverts for the teens will involve movie stars and rave making artistes. These adverts featuring the new product, "McPizza " is frequently aired on the television, the internet and social networking media. Television will be used as the main medium for McPizza campaign because it allows a monumental creativity that incorporates sight, motion and sound which makes dramatic representations of the product. Also, network television stations and national cable television’s allow the adverts a wider coverage, reaching the target audience easily. Radio adverts will support the television adverts as it is cheaper than television adverts. Internet adverts will run on the McDonalds website, the adverts will be in form of embedded banners and also pop up adverts on social networking sites like facebook and twitter. Billboards and handbills would be handed over to them in their campuses and all over the country. Also mails are used for advertisement. The messages are clearly delivered in the adverts, '' get the biggest, most nutritious and the healthiest pizza at the best price".
Sales promotion refers to the activities that lead to a temporary and reasonable increase in sales of a product. There are various ways of performing a sales promotion, some of them include; temporary reduction in price, free gift offers, sweepstakes or games and contests.
PROMOTION
Loyal customers are rewarded with branded McDonalds gift items such as Ipods, Ipads, computer games, laptops, tickets to watch the 2012 Olympic games in London, finals of the 2012 European champions league with the star prize being a 2 week all expense paid trip to Hawaii. Each customer is given a coupon after purchasing a $15 worth of giant McPizza, on the coupon is a set of concealed numbers, which is revealed after scratching the silver panel on the coupon. The number determines the winners during the draws. The draws are held at the end of the promotions, which will be on for six weeks.
Also, McDonalds hot caramel chocolate drink is given free of charge to all customers whenever they purchase a giant McPizza.
Public relations are concerned with developing goodwill and understanding between organizations and the public. It serves to build general awareness about McPizza, encourage product trial, and respond to negative news and building image. McDonalds was once accused by critics, who linked her products with childhood obesity. The public relations department dissuaded the minds of the public from this malicious attack. The company responded by training ten thousand football coaches in the United Kingdom. This in essence is to make people more active. Since the launch of the programme in 2002, over 5,100 local level football coaches have been trained. All the coaches wore McDonalds branded tracksuits during the sessions and also used McDonalds branded balls. In response to the obesity attack, McDonalds launched its healthy eating campaign in newspapers.
Personal selling implies personal communication between buyers of McPizza and sellers in an exchange situation. It is effective in building buyers preferences, actions and convictions.
The key element is the sales persons. They need to be polite, be impeccably dressed, smart and pleasant to the customers. When this is done continually, there is a tendency for the customers to come again for McPizza. To achieve this feat, the sales persons must be trained and retrained from time to time, be adequately remunerated and highly motivated.
PRICE
Price is a major element of the marketing mix. It is an important issue because it plays a major role pertaining to product positioning. Also, pricing affects other elements like product features, channel decisions and product promotion. Though, there is no single way to determine product pricing, the following are steps that could be followed to determining price. Determine marketing strategy, estimate the demand curve, make marketing decisions, calculate cost, set pricing objectives, determine pricing and understand environmental factors.
Develop marketing strategy- A market analysis is performed with positioning, targeting and segmentation.
Marketing mix decisions- The product is defined, promotional tactics and distribution are employed.
Calculate cost- The variable costs and fixed costs are associated with the product as this might decide profits to be made. The unit cost of McPizza sets the lower unit of what McDonalds will charge and determines the profit margin at higher prices.
Estimate the demand curve- This is the association between quantity and price, the variation between quantity demanded and price. For products already in the market, experiments can be performed at prices below and above the market price to determine the price elasticity of demand
Environmental factors- The legal and competitive environment in which McDonalds operates would be taken into account. Pizza prices by pizza hut, dominos and other competitors in the pizza business would be taken into consideration when fixing the price of McPizza. The price range of pizzas in the market is between $8-20. Setting the price too low or too high would pose problems for McDonalds.
Pricing Objectives
McDonalds pricing objectives must be identified in order to determine the optimal pricing. Common objectives include:
Current profit maximization- Has to do with maximizing current profit and takes into account revenue and costs.
Current revenue maximization- Has to do with maximizing current revenuewithout regard to profit margins. The objective is to maximizing long term profits by increasing the market share and lowering costs.
Maximize quantity- Has to do with maximizing the numbers of customers served so as to decrease long term costs.
Maximize profit margin- Has to do with maximizing the unit profit margin.
Quality leadership- Price is used to signal high quality in the market in a bid to position McPizza as the quality leader.
Partial cost recovery- This is seen in companies that has other sources of revenue.
Survival- When there is overcapacity and market decline, the goal may be to select a particular price that will cover costs and allow the company to continue operating in the market.
However, for McPizza, the pricing strategy is to maximize quantity. Penetration pricing strategy is employed to meet this objective. Penetration pricing seeks to maximize quantity by means of a low price. It is better utilized when the demand for the product is expected to be elastic, that is the customers are sensitive to price, quantity demanded will increase tremendously as price falls. Also, penetration pricing is better suited when cumulative volume increases with a corresponding large decrease in costs.
DISTRIBUTION
Distribution channels are designed to move the products from the hands of the company to the hands of the consumer. The type of distribution channel for McPizzas use is the direct channel. Three different methods will be employed in selling McPizza directly to the consumers.
The first method is the delivery method. The customer calls a McDonalds restaurant, places an order, and the order is delivered to the customer promptly. Secondly, the customers come to McDonalds restaurants to dine in. They place an order in the restaurants; they either dine in or leave with the order. Also, customers can go online to order for McPizza. They log on to the internet and place an order. This also allows the customers view the whole menu, and order for their product without disclosing their credit card numbers.
Level of distribution coverage
It must be understood that distribution creates costs to the company. Thus the process for determining the right level of distribution coverage often comes down to an analysis of the benefits versus the costs associated with the gain benefits. There are three main levels of distribution coverage, they are: mass coverage, selective coverage and exclusive coverage.
The mass coverage strategy seeks to distribute products widely in nearly all locations that the product is sold. It is feasible for relatively low prized products that appeal to very large markets. However, it is associated with high distribution costs.
The coverage method for McPizza would be nationwide.
McDonalds is the best experience for busy people. She prides herself on the quality of her products and services, also on her excellent delivery services.
McDonalds has a successful history of introducing exciting new products to increase sales and reach new customers. This in essence is what maintains McDonalds as a leader in the market. The success level of the McPizza will depend on the right marketing and promotions mix. The target market are the generality of the population, the teens , the youths and the adults. Various adverts will be scheduled for the three groups to increase the effectiveness of the campaign. Also , promotion of the products through rewarding loyal consumers by giving free McDonalds branded materials like Ipads and Ipods will be created. Also the chance of winning the grand prize of the promo is open to all . A free jar of chocolate drink accompanies a purchase of the giant McPizza. Also , during the promotions, there is the chance of having extra toppings and extra cheese on the pizzas as long as stocks last.
Pricing will be a major determinant in the campaign, as prices of other competitors such as pizza hut and dominos has to be taken into consideration.
In conclusion, if the above is well harnessed, the success of McPizza in the pizza market is assured.
REFERENCES
http://www.mcdonalds.com/us/en/promotions.html
http://www.aboutmcdonalds.com/mcd/our_company/mcdonalds_system/what_we_do.html
http://marketing.about.com/od/marketingplanandstrategy/a/marketingmix.htm
http://www.redcar-cleveland.gov.uk/main.nsf/Web+Full+List/C67822986BFF979C80256B720049174A?OpenDocument
http://businesscasestudies.co.uk/mccain-foods/the-marketing-mix-in-the-food-industry/promotion.html
www.m.guardian.co.uk
www.netmba.com/marketing/pricing
www.dreambugdesigns.com/pizzaHut.pdf
