McDonald’s loyalty program is off to a strong start

More than 21 million U.S. customers have enrolled in McDonald’s digital rewards program since its launch in July, helping the burger giant drive higher sales in its fiscal third quarter. The MyMcDonald’s Rewards program, which offers users enhanced speed and discounts that accumulate over time, is generating more frequent trips among its active users, while providing the company the opportunity to deepen its relationship with them, and use data from their visits to inform marketing decisions. More than 15 million customers are already active on the platform, executives said today during an earnings call. That has exceeded expectations so far but represents only a fraction of the company’s ambitions. CEO Chris Kempczinski said the company aspires that 40% of its customers be “known customers.” That figure is about 5% today. “And then you can imagine all sorts of things that you’re able to learn about customers and their preferences when you’re able to get more and more of your transactions where you know who the customer is,” Kempczinski said, according to a Sentieo transcript of the call. “And loyalty is certainly the way that you get that customer to engage and share information with you." More brands have turned to loyalty programs as a means to assemble first-party data (information collected directly from its consumers) as digital players such as Google phase out third-party cookies that had been used to track and target consumers across the web. McDonald’s is enticing customers to sign up for the program with daily deals and introductory offers of 1,500 points, which can be redeemed on future visits. Customers using the app collect 100 points for every $1 spent. Executives called out loyalty as one contributor to a U.S. comparable-store sales gain of 9.6% in the quarter, which ended Sept. 30. Strong average check growth driven by large order sizes and menu price increases also contributed, as did marketing promotions behind the Crispy Chicken Sandwich and the company’s Famous Orders platform, the most recent of which is a meal featuring a Big Mac, four-piece Chicken McNuggets, medium French fries and medium Sprite, tied to the rapper Saweetie. “Menu and marketing efforts with products like the Crispy Chicken Sandwich and successful Famous Orders like the Saweetie Meal, have elevated our brand and helped drive underlying sales growth across the business,” Chief Financial Officer Kevin Ozan said. The loyalty program launch—which includes a digital payment option—is also helping digital adoption more broadly: The company stated that 20% of its sales in its six largest markets are coming through various digital channels, including automated ordering kiosks, the company’s app and third-party services. In a move it said would further accelerate the development and deployment of its Automated Order Taking (AOT) technology, McDonald’s and IBM separately on Wednesday announced an agreement whereby IBM would acquire McD Tech Labs, which was created to advance employee and customer-facing innovations following McDonald’s 2019 acquisition of Apprente. “McDonald’s development and testing of AOT technology in restaurants has shown substantial benefits to customers and the restaurant crew experience. Moving forward, IBM’s expertise in building customer care solutions with AI and natural language processing will help scale the AOT technology across markets and tackle integrations including additional languages, dialects and menu variations,” the companies said in a statement. Menu prices at McDonald’s are up by about 6% this year, increases that Kempczinski said are covering the labor and supply cost increases. The price increases have been “pretty well received by customers,” Kempczinski said. “We do certainly have a very big focus to make sure that we are balancing cost pressures and being able to cover those, with making sure that our value perception by customers continues to be favorable. And we are continuing to see those surveys and scores, from a value favorability perspective, still positive from customers.” Commodity prices are up by about 2% so far this year, “but we expect for the full year for those to be up roughly 3.5% to 4%, which will put a little bit of additional pressure on the fourth quarter, obviously,” he added. Labor inflation and staff shortages are also continuing to challenge the company and its franchisees, Kempczinski added. At company-run restaurants, wage inflation is running at about 15%. “That is putting some pressure on things like operating hours, where we might be dialing back late night, for example, from what we would ordinarily be doing. It's also putting some pressure around speed of service, where we are down a little bit on speed of service over the last year and the last quarter. That’s also a function of not being able to have the restaurants fully staffed.”

McDonald’s loyalty program is off to a strong start

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