McD's sees growth, but are ads a factor?

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When McDonald's, after a string of disappointing results, posted its best same-store sales figures in five years, much credit was given to CEO Jim Cantalupo's turnaround plan, which includes new menu items and better training. Analysts also cited a successful "Monopoly" promotion and the popularity of new salad and breakfast-sandwich lines for driving store traffic.

The looming question, though, is what role the fast-feeder's high-profile new ad campaign played in boosting sales. The answer is unclear, but the chain's marketing executives said that the controversial campaign is doing what they want it to do.

Golden arches gains

"Advertising has gotten off to an excellent start," said Larry Light, McDonald's global chief marketing officer, citing the results of a 10-country consumer survey. "It's communicating a fun and youthful spirit, and that something's changing at McDonald's. Strategically we're convinced it's right on target. It's meeting or exceeding all the impact goals we set for the first month."

In October, the Golden Arches posted global same-store sales gains of 8.4%, with U.S. gains up 15.1%, its biggest comparable sales gain in five years, according to CIBC World Markets. Financial observers have credited a variety of moves in Mr. Cantalupo's "Plan to Win" for helping drive McDonald's strong sales gains, including fewer store openings, longer operating hours and solid sales from the Dollar Menu. Another factor appears to be still-weak sales from Burger King, as McDonald's and Wendy's surge.

But Bill Lamar Jr., McDonald's senior VP-marketing for the U.S., cited a telephone poll McDonald's conducted of its customers 15 days after the ads launched in key markets.

"We exceeded the same levels of awareness with "I'm Lovin' It" as we saw with "We Love to See You Smile" with 40% fewer [gross rating points] and our awareness levels at 15 days of our commercials hit our 30-day benchmark," Mr. Lamar said. "I'm feeling very good about the ability to break through with "I'm Lovin' It."

Although McDonald's didn't measure intent to purchase, Mr. Lamar said the U.S. unit is getting 650,000 more customers a day in October and November compared with the nine months of the pre-launch period.

Mark Kalinowski, analyst for Citigroup's Smith Barney, cited McDonald's successful Monopoly scratch-off game and buzz around its McGriddles breakfast sandwiches and Premium Salads for the continuing sales surge. "It looks as if people who have mostly shunned McDonald's as of late are being enticed back into the stores by positive word-of-mouth," he said in an Oct. 31 note to investors.

Controversy

It seems too early to credit the advertising alone for the lift, and McDonald's executives did concede the ads also have caused some controversy. Some franchisees and customers have complained about the edgy nature of the spots, created by Omnicom Group's Heye & Partner, Unterhaching, Germany.

"Our advertising has missed our customers," said one franchisee. "It is trying to keep pace with other companies that do not have our base, food, fun and folks-moms and kids. With our good sales-why would we leave our customer base? A big mistake." Another franchisee said, "I'm hatin' it. Funny how we had to sign OPNAD pledge cards before the new commercials hit." Franchisees were asked to re-sign pledges to OPNAD, the national advertising committee,before the U.S. launch Sept. 29.

"Change is uncomfortable and some people out there have been polarized by this change, so they questioned the change," Mr. Light said. "We expected that, but our goal was to be dramatic, not subtle. It will take time for people to become comfortable with the new McDonald's. We will continue to innovate, change and evolve in an aggressive manner."

He also has vowed that the effort would be more than just a tagline or a campaign. Tom Collinger, a professor of integrated marketing at Northwestern University's graduate program said the key could be how much is done to bring to life the campaign promise in restaurants.

"If this is truly a system-wide and integrated effort that is going to not only recalibrate expectations but also the delivery on those expectations, then you've got a chance of making a difference," he said.

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