McDonalds fails to be believable

McDonalds fails. Brand problems.

McDonalds Fails
McDonalds Fails is a statement no one believed could happen

McDonalds seems to be losing share to other fast food and casual restaurants. Not too surprising from my perspective because the amount of competition has increased beyond belief. The choices for quick and other poor food choices has exploded.

There is even a new major player in a gas station (Sheetz). The category is rife with new entries and new day parts. It seems that everyone has entered the breakfast category.

One chain tried to create a Fourth Meal category, hoping to attract the morbidly obese. Some chains are now available 24 hours a day for the sudden need to get a burger and a thick and frosty drink after you unexpectedly wake up to pee at 3:30 am.

So what is the news for today? McDonalds fails is the news. McDonalds is repositioning itself as vegan. You think I am kidding? Well, actually I am because it would be absurd for McDonalds to claim such a position. They are actually moving into a position of quality ingredients.

To my thinking, it might just as well say it is vegan. But the truth about how McDonalds fails is almost as absurd. (Read another recent blog on McDonald’s here)

The art of branding with importance is a subtle formula. What you claim must be of highest emotional intensity to the target audience you wish to influence and you brand has to have an innate permission to claim it as true. I’m not sure of the validity of either support points for McDonald’s new position de jour.

McDonalds Fails Again

McDonalds fails. Ronald McDonaldRemember when McDonalds was about herd mentality? When the golden arches told us how many millions of our fellow foodies had been server?

How about when McDonalds was all about kids? Ronald McDonald and the Hamburgler all got their start here.

Hamburgler. McDonalds fails
The Hamburgler is trying to grow up

(Read an interesting update on the Hamburgler here). Happy Meals replaced the Big Mac as the signature dish. Playgrounds sprung up at the front of nearly every store.

Then McDonalds decided to try a dual strategy and excite adults with its Arch Deluxe burger.

McDonalds Fails Arch Deluxe
The Arch Deluxe was a monumental failure

In the past, a statement like McDonalds fails would have been absurd in itself.  No one REALY paid attention to the changes because McDonalds was the 800-pound gorilla who, it seemed, could do no wrong. It just ate everyone else’s lunch (pun intended).

But more scrutiny is on the aging chain now as its market share continues to slip. Operations and process improvements won’t save it this time. Possibly all McDonalds has going for it is a menu like everyone else but better locations.

McDonalds fails and Papa JohnsHopefully, McDonalds has great research indicating that better ingredients is the highest emotional intensity in the category.

I doubt that it is.

After all, The forgettable Papa John’s brand has been claiming the same thing for years with a massive TV spend that has the founder and owner in our face repeating the inane line at every turn.

Papa John’s spends more than any other pizza chain and yet it has never been able to get out of the less than $10 pizza wars. In other words, Papa John’s still competes on price. That is all it has going for it.

McDonalds Fails— Unbelievable Claims

mcDonalds failsThe problem for Mickey Ds is that the claim is unbelievable in its current brand’s permissions. No one thinks it has better ingredients and quality food.

We all believe it is mass produced hockey puck-like food. What’s in those shakes (that they can’t call milk shakes)? How many beaks and chicken feet are ground up and reformed into nuggets? What’s a McRib? What part of the sow does that come from? The ribless part?

Once you lose the brand myth from those that identify with you… well you have lost all of your equity. McDonald’s needs a brand makeover and not the costume festooned Halloween-like change it is proposing now.

Denny’s to open up The Den

We all love breakfast. There’s no getting around it that eggs, coffee and whatever else you want to include in that category is like nectar of the gods to many of us.

That’s why I lament that there’s not a Denny’s restaurant in town. That’s hard to believe in a city with a population of more than 270,000 people. I mean, Denny’s has more than 1,500 locations in the US. You’d think it could find a place in Greensboro, NC. (It did have one, out in the outskirts, but it closed.)

But maybe there’s one hidden here because the restaurant chain is taking advantage of the newest trend in the industry: Fast casual.

Denny’s is coming from the other direction from the fast food restaurants that are moving up from fast to casual. Denny’s is coming down to fast from casual with its new concept called The Den.

Please come to Greensboro.
Please come to Greensboro.

These fast-casual spots have been developed for college campuses and contract service providers (such as those in a large company’s cafeteria) but Denny’s plans on opening off-campus locations in the future. (It opened its first in San Diego recently.)

Denny’s is actually doing well, with same-store sales increasing nearly 5% for the fourth quarter, but opportunities in this category are few. In the fast food industry, chains have been aggressively attacking the breakfast daypart because lunch, dinner and late night are maxed out. (That’s why you see Taco Bell entering breakfast, for example.)

Denny’s has the permission to enter this fray because its bailiwick is breakfast. The Den will serve breakfast all day, something I’m sure is a hit on college campuses.

I’ve spoken a lot about brand permissions, what categories brands have permission to play in based on their equities. Denny’s has permission to play in this space because, even though it might claim otherwise, it is not so high class that consumers won’t see the transition as an emotional problem.

The issue is that the breakfast category is crowded. Everybody had entered that daypart or is planning on it. That means someone is going to lose and wonder where its next opportunity lies.

That’s the reason why fast food chains have gone fast casual, trying to make a better in-store experience rather than consumers just zipping through the drive-thru. (Studies have shown that you spend more if you go inside.)

My guess is that the Den, if properly marketed, will be a success but force out others entering the market. Now, if it can just enter the Greensboro market, I’ll be happy.

Buffalo Wild Wings expands – for the right reasons

Buffalo Wild Wings is shaking things up. If you’ve missed the news, the chain is taking on the small, Dallas-based, Rusty Taco (known for street style tacos). Plus, it’s joined forces with PizzaRev, a health conscious pizza shop primarily located in California. Not bad.

Buffalo Wild Wings is a place where you can take your entire family for a fun and satisfying meal. It doesn’t break the bank or take forever to hit your table. It’s a place where you can roll up your sleeves and eat good comfort food. In fact, this type of dining (“fast casual”) is exploding. Technomic, a food industry consulting firm, reported that, in 2013 alone, fast casual grew 11% (faster than any other dining segment).

Buffalo Wild WingsAnd, as I wrote yesterday, it’s part of the reason why Burger King is merging with Tim Hortons. The same holds true for Buffalo Wild Wings as it expands its base.

Kathy Bennings, Buffalo Wild Wings’ executive vice president and chief strategy officer, had this to say about the merger: “Buffalo Wild Wings’ investment is part of our strategy to partner with emerging restaurant concepts that have the potential for significant growth, can work throughout the country and have a highly engaged management team with a passion to grow the business.”

Unlike Burger King’s grab, Buffalo Wild Wings doesn’t seem to be acting in desperation. It’s simply expanding on what it already has.

Pizza Huts Tuscani Ad

Pizza Huts Tuscani Ad was More Clever Than You Thought

By Tom Dougherty

You’ve probably remember the ad. It opened with 50 New Yorkers tasting pasta at what appears to be a swanky Manhattan restaurant called Tuscani.

The Alfredo is Great!

Pizza Huts Tuscani AdThe New Yorkers exclaim over the dishes.  “The alfredo is great!” says one trendy-looking, young man. Then comes the clincher: The cook comes out and says he didn’t even cook it. Instead, the crowd is told that Pizza Hut made the pasta.

The taste testers are shocked – and somehow giddy by the notion that Pizza Hut, of all places, made pasta great enough to fool them. Here’s the dirty, little secret, though: It’s not that hard to fool them. You could have put any kind of decent pasta out there and the tasters would have given it a thumbs-up.

 

It Wasn’t Pizza Hut

It wasn’t the food they were reacting to. It was brand – and not Pizza Hut’s, by the way. It was the brand of “Tuscani” the Italian restaurant in Manhattan where this pasta was served. That’s especially true when you consider that, as the New York Times recently reported, the respondents were eating at a restaurant called Provence, a well-known Italian restaurant in SoHo, not Tuscani as the ad would leave you to believe. (There is no restaurant in NYC called Tuscani and is instead the name of Pizza Hut’s new line of pasta.)The folks that made the Pizza Huts Tuscani Ad never seemed to notice.

The Diners Saw Themselves

However, the important revelation for marketers is that the taste testers were responding to the brand of where they were because they saw themselves in it. They are well-to-do, handsome and pretty, young New Yorkers who, they believed, can appreciate the fine things in life, including recognizing a quality SoHo restaurant.

The Pepsi Challenge

Pizza Huts Tuscani AdThere are numerous other examples of taste testers responding to the power of brand. Many years ago, Coca-Cola realized that Pepsi was seriously cutting into its market share and became alarmed. Coca-Cola couldn’t believe that customers were actually choosing Pepsi and were even more alarmed when Pepsi started winning blind-taste tests by a significant margin. (Remember the Pepsi Challenge?)

However, someone at Coca-Cola got smart and did the taste tests over. Only this time, the tests were not conducted blind. Taste testers could actually see the brand they were drinking, see the cans themselves, and amazingly Coke handily won the taste tests by an even more significant margin.

The Coke Brand

Why? Because there was something about the Coke brand that spoke to the respondents so powerfully that they now believed Coke tasted better. Most of us, if not all, don’t like to hear those kinds of stories because it proves we make purchasing decisions for reasons that aren’t the considered, knowledgeable reasons we think they are. But the truth is that we all make purchasing decisions every day based on brand and only backfill those decisions with seemingly more thoughtful reasons.

Is it the Taste?

Ask a beer drinker why they are loyal to market leader Budweiser and they will tell you it’s about the taste. Yet Budweiser rarely wins the taste tests. What Budweiser has understood for a long time is that the power of brands ends up determining market share and preference. The companies that understand that are the most successful.

What you do as a business is the business of your business. But what determines your ultimate success is the business of your brand, what you mean to customers. In some fashion, the most successful businesses consider themselves marketers first. Does Nike really make the best running shoe?

Pizza Huts Tuscani AdThose loyal to Nike will tell you they do, but have those joggers really done research and compared shoes? In most cases, probably not. Instead, they responded to Nike’s brand about no-nonsense achievement – “Just Do It” – and backfilled other reasons such as comfort to justify the choice. No running shoe company could exist if its shoes weren’t comfortable. No beer could exist if it didn’t have good taste.

Pizza Hut branding strategy seeks to understand that but they seem a bit lost.  This has been the brand of Crunchy Cheesy Crust Pizza and Dippin’ Strips, which doesn’t exactly scream trendy SoHo. Pizza Hut understood that, to convince those who wouldn’t be caught dead seeing themselves in the Pizza Hut brand, it had to align itself with another brand that spoke to them. Clever.

And very effective. It really doesn’t matter that there is no restaurant called Tuscani in New York City. Pizza Hut branding build a physical brand that reflected who the taste testers were (it’s unclear whether they knew it was Provence, but most likely they did) and turned the tables on them so they were forced to accept Pizza Hut as a brand. The true cleverness is now that the taste testers know it was Pizza Hut they can’t go back and say the food was bad. Otherwise, they would be admitting they responded to brand. And no likes to admit that. Right?

QSR Study: How to Beat McDonalds

A QSR Market Study. What does the category look like?

By Tom Dougherty

QSR Market
McDonalds seems to always win

The business world is fair. There are clear winners and losers. While outside forces, such as the economy, influence who wins and who loses, the smartest and savviest are usually the ones that come out on top.

Nowhere is that more apparent than the world of quick-service restaurants (QSR). McDonald’s has remained the top dog in terms of market share for decades, having seen a profit every year since 1954. That’s 58 years of unparalleled success.

It has earned it. It has constantly moved the needle among the large burger chains (Wendy’s and Burger King are constantly playing catch-up) and it has the most consistent brand in the market.

Its “I’m lovin’ it” brand perfectly encapsulates its brand of fun, allowing it to dominate the market with $34 billion of revenue in the US alone last year, more than twice the revenue of Wendy’s and Burger King combined.

Sure, it has more restaurants than anyone other than Subway (more than 14,000 in the US), but it has the same number as Wendy’s and Burger King combined – meaning McDonald’s is out performing its burger competitors nearly two to one in in-store sales.

It has consistently added items to its menu, was one of the first to provide healthier options (while still offering up the 540-calorie Big Mac, mind you) and is meaningful to most audiences that share a common denominator.

 

 

Why can McDonald’s do it, but others can’t?

Simple. Because McDonald’s has a brand.

QSR Market

It rarely positions itself on the table stakes of the market – the things you have to have (good price, good taste, friendly service, etc.) to be in the QSR market – because its “fun” brand has been imbedded with consumers so powerfully that it is always included in the considered set. (Read about brand positioning here)

Even when McDonald’s markets table stakes, it wins – especially when the rest of the market does the same. That’s because the market leader always wins when all things are perceived to be equal.

Here’s the funny thing, though. The market share McDonald’s owns can be stolen. It will probably always remain on top for several more years, but its market share could erode if the competitors – not just Wendy’s and Burger King, but all QSRs – become different and better.

Update: In January of 2014, McDonald’s announced some erosion of market share. Sales dropped .2 percent in 2013 and the number of customers dropped 1.6 percent. McDonald’s is beginning to seem to consumers like an unfocused mix, especially as places such as Hardee’s markets against the healthy food option aggressively. We suspect we’ll see a major McDonald’s response soon. We’ll keep you posted.

The Wide Net of Competition

QSR Market

To take on McDonalds, you don’t need to be just a burger restaurant. All QSRs are in the consumer’s considered set. That is, Pizza Hut doesn’t just compete with Papa John’s and Domino’s. KFC doesn’t just compete with Chick-fil-A and Popeye’s. They all compete with each other, so share can be stolen from anybody. Not just those in your food sector.

The definition of your competition is what your target audience does that takes the place of what you offer. That means the competition of a QSR is also includes choosing to eat at home or at a nice restaurant. (Read about brand audits to better understand opportunities here)

However, the advertising of QSRs plays later in the decision tree, when consumers have already decided to eat at a QSR (or have it delivered). It’s all about what they offer, occasionally positioned against someone else in their market. (Taco Bell’s “Think Outside the Bun,” Chick-fil-A’s “Eat More Chikin.”) The most powerful brands play as early in the decision tree as possible, and few in the QSR market play effectively at the point of decision.

Kentucky Fried Chicken

KFC QSR MarketKFC used to play well in this area, often promoting a parent bringing home a bucket of chicken. It was a representation of a decision being made early. The suggestion was that the decision was between KFC and eating what’s in the fridge.

After having a lousy 2011 – losing $200 million in sales last year, closing more than 200 outlets and sporting dismal per-store sales – KFC is looking back to that strategy. Its new spot hints that “Dad’s bringing home KFC” is back.

 

 

KFC’s not all the way there because it’s focused on the sides (mac & cheese vs. mashed potatoes), but the lynchpin is the fight between those waiting at home (grandpa and grandson).

What the rest of QSRs must remember is that KFC, even though it makes chicken, is a competitor of McDonald’s, Taco Bell, Dunkin’ Donuts and even your local grocery store. They are all fighting for the same share.

Once that competitive set has been established, now begins the process of creating preference – and eating into McDonald’s’ gigantic market share.

In the QSR Market those closest to McDonalds

UnknownSubway

Although Subway is actually the second largest QSR, Wendy’s and Burger King have been jockeying with each other for position under the McLeader in the burger category with Wendy’s currently holding a slight edge.

But both have been spinning their wheels. In just about every way, they have been chasing McDonald’s by basically aping it. When McDonald’s makes a menu change, so do they. Their only response to McDonald’s brand is to advertise taste and cost, which will not get those choosing McDonald’s to switch. (For “taste” to work, the McDonald’s eaters would have to believe the hamburgers they are eating are awful. If that’s believed, then why are they choosing McDonald’s in the first place?)

The slight rise of Wendy’s has been attributed to a healthier look, as evidenced by this current spot.

 

 

Healthy fare, the single-biggest trend in the QSR industry, is welcome, but it’s not the Holy Grail for success. It’s quickly becoming a table stake because everyone has salads and, for places like Wendy’s and Burger King, sales are not the core items. In fact, because of they are fast food, those seeking out healthier will not prefer them.

What has happened is twofold:

  1.  QSRs are scrambling for any advantage for growth and believe it’s about process (meaning, “if we could only grow our menu to reach a wider audience, we’d grow our share)
  2. Neither Wendy’s nor BK has captured the highest emotional intensity in the market. Think about it this way. Wendy’s new campaign is “Now that’s better.” For that to work, it must believed. It doesn’t suggest that Wendy’s is better (which Wendy’s wants it to suggest), but just that Wendy’s has improved. With the competition also touting healthier fare, it becomes an inside-out promise, not one that differentiates it from the competition.

As much as anything, the jump Wendy’s made over Burger King (and the leap is only by a slight distance) is more of a product of how terrible BK has been in updating its image and trying to become meaningful to target audiences.

After ditching the bizarre and eerie, costumed King, BK has now decided celebrities pitching new menu items is the way to go.

 

 

Burger King

Burger_King_logo1In terms of meaning, this is the same tactic as the Wendy’s spot above. It’s still just, “we have healthy options” without defining who the person is that comes to a Burger King for a salad. (What, we’re celebrities? Not a high emotional trigger in this category. Might work for fashion, not for QSRs.)

The other problem for Burger King is that “burger” is in its name. The permissions to have healthier fare are far less than when you’re identified with a specific meal.

Burger King would be much better served to brand itself at BK – the way the cable channel The Learning Channel has now become TLC – but even that is a problem when you’re offering the bacon sundae.

Which one are you? Healthy or not? The inability to put a stake in the ground, saying you are, who you are for and not for, is killing Burger King.

Who are you?

Most QSRs identify themselves as the type of food they offer, which leaves audiences without a reason to choose between those in the same food category beyond location…and cost.

The Pizza Category

The pizza brands are the worst of these. The top three – Pizza Hut, Domino’s and Papa John’s, in that order in terms of revenues – are currently battling on price. Little Caesars, the fourth-place pizza joint that’s been dying a slow death for years, has seen a mild rebound after offering a $5 pizza.

But it’s a false positive because the top three are also pitching price, and battling hard.

Pizza Hut

Pizza-Hut-logoThe meaning of that ad is that we, Pizza Hut, can cram as much food into a box for only $10.

The other two main players are interesting, but for different reasons. Papa John’s is basically pitching a model, built on the personality of its founder, being generally about delivery instead of sit-in and going all-in with sports partnerships (having acquired the :Official pizza of the NFL” label).

The problem with having John Schnatter front and center is that you are tied to a personality with all its strengths and weaknesses. If that personality doesn’t resonate or some scandal negatively affects it, you are tied to that personality because it is your brand.

Papa Johns

selector_logoOther than that, Papa John’s – even as it promotes “Better Ingredients, Better Pizza” – is also about, you guessed it, price.

 

 

 

Domino’s

Dominos_Pizza_Logo14Dominos has been a fascinating test case. You might remember it copping to bad pizzas a few years ago, a tactic that drew some derision from those within the QSR market but was actually a brave and sneaky smart strategy.

 

Few actually think the big three make great pizza. It’s comfort food, and honesty – especially couched within a promise to do better – was refreshing. Inherent in the message was that the competitors don’t really try to improve their pizzas.

What developed was a sort of “pizza of the people.”

 

 

The result has been an increase in same-store sales and a gain in market share. For the other two, they’ve stood still, with Papa John’s losing some share. When most of the media blitz is about price – each trying to undercut the other – the market became relatively static. In addition, when you market on price that means you must market all the time, because you’re constantly playing catch-up. That’s why you see so many pizza commercials.

Who’s Moving Up and Who’s Moving Down

Interestingly, the QSRs that are moving up are the ones being themselves, comfortable in their own skin. The current darling of the QSR market is Five Guys Burgers & Fries, which started as a family-owned shop in Virginia and has become the fastest riser in the QSR market 15 years later. It took $200 million in profit last year, added nearly 200 new restaurants and expanded to the West where it’s taking on local favorite In-and-Out Burger.

Five Guys

Five Guys feels new to those markets, but its practice has remained the same since inception. Its menu has remained exactly the same since then. Its in-store model is messy in the right way, with peanut shells on the floor and a scribbled sign that shows exactly where its potatoes were grown.

five-guys-logoEven without a marketing campaign, Five Guys is a brand with meaning in the market. How can you have a brand without marketing? Those asking the question misunderstand the meaning of brand. Many people think brand is a logo and maybe a theme line. That’s part of it, but they are only the visual representations of that brand.

Your brand is who you are, whom you are for and who you are not for. It’s a position that guides everything you do, from look and feel and message to operations, business model and the many other ways you fulfill your brand promise.

Five Guys developed organically, which meant they were true to their brand of “authentic” and “comfort” from the very start – and never wavered.

You will never find Five Guys including salads on its menu. If it does, the brand would become less believable and something crucial to their brand will be lost.

At some point, as Five Guys grows, it will have to advertise in order to tell a wider population what it stands for. That will be a difficult transition, as businesses such as these inherently know what their brand means but have difficulty expressing it without sounding mundane and clichéd.

Checkers

Consider Checkers, which merged with Rally’s in 1999, and was known for a double drive-thru and a look nearly identical as Five Guys. It aimed for a small-town, 50’s feel.

checkers-burgers-logoSince the merger, however, the company has been struggling as it tries to take on bigger game. It closed 18 stores in 2011, was passed by Five Guys in market share and now has the lowest per-store sales of the top 15 burger QSRs other than Dairy Queen.

What happened?

Answer: It didn’t have a brand message. It has changed slogans like most of us change light bulbs, using three different ones in the last five years, an absurd number for a brand that advertises so little in comparison to the Big Three.

Currently, they are using “Feast On,” and it encapsulates the problems most QSRs are having.

 

 

While being who they are (big burgers) seems correct, there’s no meaningful or emotional switching trigger here. It hasn’t carved out a place in the mind of consumers nor who Checkers is and who consumers are when they eat at Checkers. The only self-reflection of the customer is “I eat cheap burgers.”

There is a sense of desperation here, especially as Checkers has discarded the second drive-thru window for walk-up window and added room inside. It is a brand at sea.

Summary

How do you eat into McDonald’s market share? The easy answer is to be different and better, but doing that is hard work and demands QSRs be courageous. It must slay any sacred cows that need slaying and not look back.

Speaking of cows. We haven’t addressed the recent same-sex marriage issue that’s been the center of recent Chick-fil-A news. From a purely brand standpoint, it wasn’t the smartest thing for Chick-fil-A CEO Dan Cathy to say, but it’s far from a deathblow. Chick-fil-A has never made a secret of its conservative leanings (it is closed on Sunday), has carved out a loyal following with memorable advertising (cows who can’t spell).

QSR Market ChartOther QSR brands have far worse problems: Lost brands with no to little idea of what their brands should mean.

Among the lost (like Checker’s): Sonic (reverting back to the two guys in the car while it re-groups under a new CEO), Arby’s (recently sold by Burger King), Dairy Queen (it’s “So good its riDQulous” is ridiculous), Long John Silvers (dumped by Yum! Brands, and struggling with a marketing message based on “thick” fish), Boston Market (new CEO, announced a marketing partnership with another failing brand, Blockbuster, that makes no brand sense whatsoever) and Quiznos (lost $500 million).

All have the same problem. They go round and round with the same, tired messages that are currently table stakes and, therefore, have no meaning. Quiznos once thrived because it was the only shop with toasted sandwiches. Now Subway, the second largest QSR in the US with more stores than even McDonald’s, has toasted sandwiches as does Boston Market and even Blimpie.

When you hitch your ride to a product benefit (Mmm…toasty”), you lose instant meaning when everyone else catches up.

Quiznos

 

 

Isn’t that the definition of a table stake? Everyone has low prices. Everyone claims taste. Too many of them say they’re fun (like McDonald’s).

Dairy Queen

 

 

The way to beat McDonald’s is define yourself differently from McDonald’s emotionally, strategically and tactically. That means you must find the highest emotional intensity in the market (how QSR customers define themselves), claim it and fulfill it.

QSR MarketThink outside the QSR category. In the beer category, Budweiser is nearly a monopoly, and Miller is fading fast. Why is that? If you see a Miller ad, wait five minutes, then ask yourself which brand of beer that ad was for. Most times you would say, “Budweiser.”

That’s because when all things are equal – from the point of view of the target audience – the market leader wins.

Therefore, if price, taste and “fun” are front and center of your brand – internally and externally – you will lose. “Good Mood Food” (Arby’s) isn’t that far way from “I’ve Lovin’ It.” Neither is “The Unofficial Sponsor of Summer” (Boston Market) or “So Good its RiDQulous.”

Ask yourself: Is your brand different and better? Is it emotional? Does it capture the self-reflection of the customer we want to take from your competitors? Do you fulfill that promise? If not, what changes have to be made?

Answer those questions correctly, put them into action, and steal market share from McDonald’s.

Read about our entire process here

Read about developing an understanding of precepts here

Read about market research here

Read when it is time to rebrand here