Ten new food items will be added to the menu, including salads, chicken snack wraps, smoothies and frappes.
But wait a minute. Isn't that what Burger King tried to do in the past -- expand its menu to match what McDonald's was doing?
Have all these menu expansions closed the gap between Burger King and its chief rival? Let's check the records.
- In 2000, McDonald's was 42% ahead of Burger King, in average domestic revenue per unit.
- In 2005, McDonald's was 73% ahead of Burger King.
- In 2010, McDonald's was 101% ahead of Burger King.
Because it's logical.
Our chief competitor is expanding, goes the thinking, therefore we also have to expand to keep up.
Furthermore, goes the thinking, our chief competitor is weak. A recent article in Advertising Age reported, "According to people close to the company, its internal tracking system finds that McDonald's consistently ranks near the bottom in quality perception when compared with rivals."
So far so good, but here's the rub: Line extension, menu extension -- whatever you call it -- weakens a brand. That's exactly why the McDonald's brand has been weakened.
But McDonald's is still the "leading" fast-food chain. And nothing in marketing beats leadership. That's the marketing principle that trumps the logic of line extension.
How can a No. 2 brand compete successfully with a leader? Not by copying the leader and trying to do it better. That almost never works.
Take Bed Bath & Beyond vs. Linens 'n Things, the No. 2 brand in the home-furnishings category. Bed Bath & Beyond is one of the most successful retailers in the country, having increased sales every year for the past decade, to $9.5 billion last year from $3.7 billion in 2002.
The folly of emulation
What was Linens 'n Things' strategy? Emulate the leader with similar stores and similar marketing strategies.
(You might remember the floods of 20%-off coupons issued by both chains, a strategy Bed Bath & Beyond continues to use today.)
In 2008, Linens 'n Things went bankrupt. How can one chain be so successful and a very similar chain go bankrupt?
It defies logic, but is consistent with the most important principle of marketing: The leader brand has all the advantages.
That's not leadership in a category, of course. That's the perception of leadership in the mind of the prospect.
Take Staples vs. Office Depot. A decade ago, the two office-supply chains were neck and neck. But in the last 10 years, Staples got out in front and today is not only twice the size of Office Depot, but also has the perception of leadership.
The numbers tell the story. Staples in the past decade had a net profit margin of 4.1%. Office Depot, 0.06%.
Consider Barnes & Noble and Borders. Which chain recently went bankrupt? The No. 2 chain, of course.
Consider Best Buy and Circuit City. Which chain recently went bankrupt? The No. 2 chain, again.
Consider Time and Newsweek. Time is profitable, and Newsweek was sold to Sidney Harman for one dollar.
Two ways to build a brand, not one
Too many left-brain management executives believe there is only one way to build a brand. "We have to be better than the market leader." That's logical, but wrong. There are two ways to build a brand.
1. Be the first brand in a new category, and then you are automatically the market leader. Now the job is to grow the brand as fast as possible until it achieves a leadership position in consumers' minds. That makes your brand almost impossible to overtake. For example:
- Facebook in social media
- Gatorade in sports drinks
- Red Bull in energy drinks
- Five Hour Energy in energy shots
- Vitaminwater in enhanced water
Red Bull was introduced in small, 8.3-ounce cans, so Monster came out in 16-ounce cans and rapidly became the No. 2 brand. In the past decade, Monster Beverage Corp. had revenues of $7.4 billion and a net profit margin of 15.5%.
Most of the engagement rings and wedding bands sold in America used to be made with gold. Then Scott Kay introduced his platinum line and built an enormously successful jewelry brand.
The leading high-end pen used to be Cross, a thin and elegant instrument. Not today. Montblanc introduced a "thick" pen and became the leading global brand, with a 28% market share.
What about Burger King?
While McDonald's was expanding its menu, Burger King should have done just the opposite.
Consider Five Guys Burger & Fries. Burgers, hot dogs, veggie & cheese sandwiches and french fries. "We're fortunate in the fact that we don't have to keep remaking ourselves," says founder Jerry Murrell. "We've got the same menu since 1986."
No salads, no wraps, no smoothies, no frappes. Last year, Five Guys sales were up 33% and unit count rose 25%.
Meanwhile, Burger King fell behind Wendy's to become the No. 3 burger chain.
Less is more. Or as Antoine de Saint-Exupery once wrote: "Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away."