McDonald’s Gets Personal

Consumers are trading down to the fast-food chain amid inflation, and the QSR is locking them in through personalization.

July 28, 2022

McDonald's My Rewards

ALEXANDRIA, Va.—Consumers continue to see McDonald’s as a value leader, even though its menu prices have increased in the high single digits, reports Forbes. Despite increased costs, the fast-food chain reported a 3.7% comparable sales increase in the U.S. during the second quarter, growth it says was driven completely by higher menu prices.

That value perception by consumers is likely to increase as the fast-food chain increases its digital business, according to Forbes, including its MyMcDonald’s Rewards program, which was launched nationally last year. McDonald’s reported that digital sales in the company’s top six markets exceeded $6 billion, or about one-third of total systemwide sales.

Increased digital customers means more chances for the restaurant brand to personalize their experience.

“You have to think about value in a targeted way. As we get more digital, there are different products with different elasticities in different geographies. I get excited about the ability for us to be much more targeted in how we deliver that value,” McDonald’s CEO Kempczinski said on a recent earnings call. “What we’re looking at doing is exactly which products do you need to offer value, to what degree and through what vehicle—an offer, a menu price adjustment or promotion?”

Kempczinski also said that value is no longer a one-size-fits-all equation because of the opportunity digital provides in learning more about how customers access the brand.

“To get a sense of what the opportunity is (with digital), if you look at Germany, France, the U.K., China, digital is over half of sales in those markets. In China, it’s over 80% of sales. That’s compared to the U.S., where it’s maybe a quarter of the sales. So, there is a big opportunity for us to increase digital as a percentage of sales,” Kempczinski said on the call. “What happens when you do that is the percentage of identified customers goes up dramatically. That opens up a whole range of things, from service opportunities, pricing opportunities, etc. Digital for us, we’re starting to see the benefits, we just need to go harder and faster.”

McDonald’s is also focusing on the local level when it comes to pricing and menu items. In the past, McDonald’s featured a national value menu, but now menu pricing is based on location, which allows individual field offices to market certain products that work best in their market and against their competitors.

“We’ll continue to have some national offers, but we’ve moved more toward a local approach which then becomes, ultimately, a personalized approach. We’re in the middle of that evolution–going from national to local to personalized,” McDonald’s CFO Kevin Ozan said on the call.

Also, because of personalization, the fast-food chain can send customers promos that will increase their spend instead of sending deals to customers who would be willing to pay full price anyways.

During the Great Recession of 2008, customers traded down from full-service restaurants to McDonald’s, and the company wants to be the go-to trade-down option again, as consumers grapple with decades-high inflation.

“We know there is challenge on the lower income [consumers], but we are getting trade down out of full-service restaurants, getting trade down at fast casual, that’s helping offset any of that impact,” Kempczinski said on the call. “While there is going to be some shifting within the cohort, our value positioning, we expect to be a winner out of all of that.”

A recent Harvard Business Review study on loyalty programs found three takeaways for loyalty programs. NACS Magazine dove into loyalty programs and how they can provide convenience retailers with key consumer insights and a competitive edge.

NACS offered a free webinar that shows retailers how to improve their current loyalty program.