A bevy of regional and national spots for the burger giant have rolled out in recent weeks promoting price breaks on mainstay products including Big Macs, Egg McMuffins and cheeseburgers.
Franchisees and industry analysts agree the move signals McDonald's acknowledgment that last year's Deluxe line has failed to move the needle in boosting domestic sales performance.
A recent national spot from Leo Burnett USA, Chicago, for example, features NBA stars promoting McDonald's french fries and 2-for-2 specials, which include two Big Macs or two Egg McMuffins for $2.
A similar campaign from Burrell Communications, Chicago, slated to break on network TV Feb. 5, also leverages NBA stars to promote discounted Chicken McNuggets.
Many of the promotions are local or regionally focused.
In Chicago, three Burnett spots feature kitschy footage and humorous "money-saving tips," such as wearing rugs on your feet to avoid the cost of carpeting a room. The spots then go on to promote $1.99 breakfast value meals, $2.99 Big Mac value meals and 99-cent double cheeseburgers.
Likewise, some 500 McDonald's units in southern California are trying to counter Burger King Corp.'s successful 99-cent Whopper with a price-test of the Big & Tasty burger-a jazzed-up Quarter Pounder priced at 99 cents or as part of a $2.99 value meal.
A local TV campaign from Davis, Ball & Colombatto, Los Angeles, supports.
VALUE EMPHASIS 'CONTINUES'
A McDonald's spokeswoman refused to comment or elaborate on the chain's recent pricing push, saying only that "value has always been emphasized at McDonald's and will continue to be so."
Not all are convinced of the wisdom of the value-price strategy.
"I'm a zealot for not advertising just price. It's a hidden killer," said Tom Lawson, managing partner-chief operating officer of Arnold Communications, Boston, gearing up to break a regional branding effort for the fast-food giant's breakfast menu (see Page 3).
"A high percentage of visitors come in for reasons other than price-convenience, for their kids-so with [price cutting] you're giving it away to others who would have been there anyway," he said.
The move back to price-promotion follows a December memo from McDonald's USA Chairman Jack Greenberg to franchisees emphasizing the need in 1997 to "re-energize and focus . . . U.S. marketing efforts and develop a national value proposition."
That about-face came to the dismay of some franchisees, who say the whole reason for introducing the Deluxe line last year was to relieve profit-margin pressures and break the cycle of price-cutting.
"A year ago, franchisees were complaining that there was too much discounting going on and they couldn't make money," said a southern California franchisee. "So the company said, 'OK, no more discounting, we're going to roll out the Deluxe sandwiches.'
"Now that those aren't working like they thought they would, the company is back to discounting on a regional basis because franchisees aren't as organized" to protest.
DISAGREEMENT AT MCD'S
Apparently there is disagreement within McDonald's corporate offices as well.
Senior VP-Marketing Brad Ball is said to favor brand-building over price promotion, but is being overruled by other senior executives pressured to improve quarterly performance. Mr. Ball and other McDonald's executives were unavailable for comment.
McDonald's spent an estimated $200 million on marketing the rollout of Arch Deluxe. Although McDonald's maintains the sandwiches have met their sales targets, bottom-line unit sales haven't reflected any significant bump for 1996. Domestic sales rose 3% to $16.4 billion, but the company acknowledged that gain was solely due to restaurant openings.
Although it did not release specific percentages, McDonald's said comparable-store sales were down for the fourth straight quarter.