McDonald's Puts Value on the Menu to Attract Thrifty Consumers

Online Auction With Taobao Offers Prizes Like Laptops to Consumers Worried About the Global Recession

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McDonald's currently operates over 1,065 restaurants China
McDonald's currently operates over 1,065 restaurants China

SHANGHAI ( fast food sales soften in China, McDonald's Corp. has opened a virtual store to promote its Super Value meals through an alliance with the online portal

McDonald's allied with Taobao, the consumer division of Alibaba Corp., known as the eBay of China, in response to growing uneasiness about the future among consumers in China.

McDonald's operates over 1,065 restaurants in China. But its core customers there--white-collar workers in tier one and tier two cities--have grown nervous about the state of China's economy and are cutting back on discretionary spending.

In numbers that worry McDonald's executives as well as senior management at rival chains such as KFC, consumers are returning to Chinese-style fast food options, usually rice or noodles dishes that feature chicken rather than beef burgers and fries.

Food sold at street stalls or in small dai pong dong snack shops commonly found in China is usually cheaper and more suited to local tastes. McDonald's hopes cheaper prices will reverse the sales drop hitting all western fast food chains in China. That decline led to the launch of Super Value meals in China last month as well as inexpensive breakfast combinations.

To win back consumers and tap into their desire to save money, McDonald's is leveraging the popularity of Taobao "to communicate the benefits of everyday super value to more young netizens," said Phyllis Cheung, McDonald's VP and chief marketing officer in China. "We needed to find a way to raise awareness of our new Super Value meals. A lot of online shoppers are looking for value, just like Taobao, and we're both talking to urban adults, especially people in their early 20s."

To promote the meals, McDonald's and Taobao launched a promotion that gives consumers a chance to win prizes for 16.5 RMB ($2.41), the price of McDonald's Super Value meals.

Web surfers who visit the McDonald's Super Value online store on can bid for items initially listed at normal retail prices. Every time a user bids on an item, the price goes down by 1 RMB (15 cents) in a reverse auction format. When the price of the item hits 16.5 RMB, the last bidder can buy it for that price.

"Amid the current global economic recession, e-business is showing its strengths clearly [of] high efficiency and low cost. By cooperating with traditional enterprises, we hope to find out a way integrating online and traditional marketing," said Zhou Junwei, VP-advertising at Taobao, which had over 92 million registered users by the end of 2008.

There are 4,000 items on offer, including laptops, cell phones, digital cameras, digital music players, watches, cosmetics, apparel and household appliances, all of which are normally for sale on About 100 products will be auctioned daily until the end of March. The e-store also lets consumers buy McDonald's gift vouchers.

McDonald's is marketing the promotion with above-the-line advertising and digital marketing created by Omnicom Group's TBWA Worldwide and DDB Group, respectively.

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