Dubbed "Campaign 55" after the year McDonald's was founded, the promotion will lower the price on a rotating slate of signature sandwiches to 55 cents with the purchase of fries and a soft drink. McDonald's believes the new price promotion will boost traffic and steer customers toward paying full price for its higher-margin fries and soft drinks.
A similar deal will rotate through the breakfast menu.
According to franchisees, the promotion will likely begin in late April. It was not immediately clear if or how the promotion would tie into Leo Burnett USA's new "My McDonald's" ad theme.
OTHER SHOPS TO PLAY ROLE
Of McDonald's roster shops, Chicago-based Burnett stands to reap the lion's share of the assignment, insiders said, although its other national agencies, DDB Needham Worldwide and Burrell Communications, will likely play a role.
Several senior Burnett executives were at McDonald's Oak Brook, Ill., headquarters Feb. 27 to map out advertising strategy, at the same time the new pricing plan was being pitched to franchisees via closed-circuit TV.
A final vote from franchisees was anticipated late Feb. 28. At least 75% of McDonald's 2,700 owner-operators must approve the national discount program.
`HOPE THEY'VE DONE RESEARCH'
"This is a very drastic move," said one wary franchisee. "And it has to be the right move. I sure hope that they've done the research to make sure it's the right move and that it's what the market wants.
He added: "All I know is that we've been down for five or six quarters and our competitors are doing well and I don't see them selling 55cents hamburgers. So my question is: What are they doing that we're not?"
Word of the national campaign came somewhat to the consternation of regional shops, which have enjoyed more business since McDonald's diverted $150 million from national to spot buys last year. The Campaign 55 media plan apparently calls for a window of local promotions sometime in April.
None of McDonald's agencies would comment on the promotion. In a statement, McDonald's said only that it was "on the threshold of an unprecedented value offering that will be good news for our customers, our franchisees and our business . . . and bad news for the competition."
While the degree of the discounts surprised observers, the underlying marketing strategy had been anticipated since December, when a memo from McDonald's USA Chairman Jack Greenberg to franchisees talked of plans to "re-energize and focus . . . U.S. marketing efforts and develop a national value proposition."
PRICE PROMOS CENTER-STAGE
In the past month, price promotions have again taken center stage in McDonald's advertising, though until now, the efforts were mostly locally or regionally focused.
News of the promotion last week sparked fears of a profit-busting burger price war, driving down stock prices for McDonald's and rivals Wendy's International and Grand Metropolitan, Burger King Corp.'s parent. Both Wendy's and Burger King have said they have no plans to match the price cut.
Concerns about an escalated burger price war are "way overblown," said Peter Oakes, analyst for Merrill Lynch & Co.
Contributing: Jennifer Waters of Crain's Chicago Business.