Home > Articles > Business & Management

  • Print
  • + Share This
This chapter is from the book

What’s Going On?

Before accepting the offer at McDonald’s, I interviewed the top management. Among others, I spoke with members of the senior leadership team, including Matt Paull, Mats Lederhausen, Mike Roberts, Claire Brabowski, and Jim Skinner. There was amazing consistency in these conversations: The McDonald’s business model is built on increased distribution. It was the “field of dreams” approach to growth—in other words, “build it and they will come.”

They all agreed that the McDonald’s brand was in trouble. They recognized that recent growth was attributable only to the opening of new restaurants, not increased visits to restaurants. They recognized that the brand image was suffering. Everyone seemed to agree that the business model was not working anymore, but no one had outlined what specifically was wrong and what had to be done.19

Joan and I discussed the McDonald’s offer. We analyzed my discussions with the management team. We considered all the ramifications for our consulting practice that we had nurtured and grown over the past 20 years. What would this mean for our consulting business? How would we manage with one of us in Chicago and the other in Stamford, Connecticut? We concluded that this was a unique opportunity—an opportunity to put into practice our principles and to be accountable for results.

We saw the challenges. But we believed in the principles and process, and we knew that it could happen—we could help change and shape the trajectory of the brand.

Lack of Relevance

With the help of Joan Kiddon, we reviewed marketing research, read what we could find in the corporate archives, reviewed presentations and speeches, read McDonald’s PR, met with a wide variety of people in different functions, and visited stores. I met with crew members, store managers, franchisees, and McDonald’s executives. I talked to people who were familiar with the original brand vision, such as Fred Turner (Ray Kroc’s right-hand man), Al Golin (Ray’s PR advisor), David Green (previously chief marketing officer for International), Keith Reinhard (of DDB advertising), Cheryl Berman (of Leo Burnett advertising), Paul Schrage, Denis Hennequin, Dean Barrett, and others. It was clear from all of this information that McDonald’s had lost its way. It was also clear that the brand had lost consumer relevance.

Loss of brand relevance was the key issue. The overarching challenge, then, was how to make the McDonald’s brand relevant again. As a brand loses relevance, the customer base shrinks, and there is a decline in customer loyalty. At the same time, price sensitivity increases. Sales, market share, and profitability decline. The times had changed, and yet time stood still at McDonald’s.

Many issues needed to be addressed:

  • Outdated store designs
  • Inconsistent advertising
  • Overemphasis on deal promotions
  • Declining product quality
  • Lack of successful new products
  • Poor service
  • Insensitivity to increasing health consciousness
  • Insufficient relevant choices
  • Decline in Happy Meal sales
  • Shrinking customer base
  • Lack of organic growth
  • Inadequate training
  • Decreased franchisee confidence
  • Reduced employee pride
  • Inconsistent global brand focus

Successful brand revitalization would have to address all these issues. The first priority was a refocusing of the growth strategy. Jim Cantalupo redefined the growth goal from trying to grow by merely opening more stores to focusing on attracting more customers to our stores. Instead of the original plan of opening 1,300 new stores for 2003, Cantalupo reduced this to opening about 600 new stores.20

How would McDonald’s meet its profitable growth objectives? Jim said, “We will grow by becoming better and not just bigger. We are going to do fewer things and do them better.”21 To be better, not just bigger, McDonald’s needed to move from being supply-driven to demand-driven. The mindset had to change from selling what we want to provide, to providing the brand experience customers want.

To restore McDonald’s brand relevance, everything needed to be reexamined. Nothing was sacred. Everything communicates. Brand revitalization includes more than just advertising and promotion. It includes training, product development, store design, pricing, packaging, public relations, and human resources.

In late September 2002, in various conversations, I was told that McDonald’s had lost focus on the brand. McDonald’s had become so cost-driven that the focus was on finance rather than on brand-building. People were feeling that there was a lack of direction. McDonald’s had lost its way.

McDonald’s forgot Ray Kroc’s (founder of McDonald’s) view that we cannot just be a provider of convenient, low-cost food; we are an experience: We have entertainment value.

The McDonald’s habit was to excite the owner-operators and try to address their concerns with new advertising at the biannual owner-operator conventions. Instead of focusing on the real challenges, the focus was on the advertising. In some cases, advertising created for the convention was rarely seen by consumers, if seen at all.

So, for example, when research showed that McDonald’s service experience was a negative, rather than investing in improving the service, McDonald’s launched a new advertising campaign, “We love to see you smile.” Of course, consumers reacted negatively. Why should they smile, when the quality was cut, the service was inadequate, and the stores were not attractive?

Therefore, not surprisingly, among the first things I was asked to address was the need to develop new advertising. Creating new advertising is fun and makes for great conventions, but without addressing the real underlying problems, it does not produce great marketplace results.

New advertising without more fundamental brand experience improvements will not work. Merely launching new advertising is not a solution to a brand’s ills.

For example, the Ford Motor Company launched an extensive advertising campaign touting its quality: “Quality is Job One.” But, the product experience did not live up to the promise. After a 17-year investment in this message, Ford decided it was time to jettison this tagline.

Ford is now focused on improving quality. In June 2007, The Wall Street Journal reported that “Ford Motor Company made significant strides in a closely watched annual quality study in which each of the Dearborn, Michigan, auto maker’s domestic brands came in above the industry average, helping the company close the gap with top Asian auto makers and distance itself from domestic counterparts.”22

“The J.D. Power and Associates annual Initial Quality Study (IQS) released Wednesday, showed long-time leader Toyota Motor Corp. continuing to lose ground in the study, with its high-volume Toyota brand slipping behind Honda Motor Co. and barely outpacing Ford’s Mercury brand. Ford was the most-awarded company on a vehicle-by-vehicle basis.”23

However, to this day, Ford still suffers from a quality perception brand disadvantage. Now, that quality has improved, Ford can focus on marketing communications to close the gap in brand quality perceptions.

Crisis of Complacency

Charlie Bell often reminded me that the McDonald’s brand needed more insistence, consistence, and persistence. He would say that McDonald’s fostered a culture of stagnation that breeds complacency. It is true that large companies sometimes suffer from a “complacency virus.” Organizations like McDonald’s have a tendency to stay with something that worked too long, assuming that all the benefits would continue to accrue without ever having to make a change. Doing things in the same old way, assuming that what worked once during the best of times would continue to work even though times had changed, would not help the brand stay relevant. It was just like Michael Quinlan said...why change? Complacency got in the way of generating passion and instilling pride.

My interviews with senior management and franchisees supported the idea that without a true commitment to the McDonald’s brand promise, without the organizational change and accountability, McDonald’s would not evolve. The turnaround at McDonald’s would require what I call the Three Cs–—clarity of direction, consistent implementation, and commitment from the top down throughout the organization.

Clarity of direction involves a clear statement of the brand purpose, promise, and goals. Consistent implementation requires that the organization must be aligned around that common focus and process. And commitment of the leadership means that people look up, not down, to determine whether they should also be committed to the new brand direction.

Passion and Pride

The sense of malaise and dispirit in the hallways of Oak Brook was overwhelming. Employee pride—a critical component of brand revitalization—had dissipated; people who were working on the brand did not really believe in the brand. Ray Kroc’s vision of creating a happy place through serving people was lost. The sense of pride about working at McDonald’s was gone: On Kroc Way and French Fry Alley, it was more funereal than fun-loving and friendly. People were experiencing a crisis of confidence.

Pride is not the same as satisfaction. Pride is bigger than just being satisfied with your job. Proud employees are engaged in their work: They are committed to helping inside and outside the company walls.24

Jon R. Katzenbach, a founder and senior partner of Katzenbach Partners, a national strategic and organizational consulting firm, had this to say about employee pride: “Pride is more powerful than money. Employee pride is the powerful motivational force that compels individuals and companies to excel.”25

Internal marketing is critical to brand accomplishment. To help revitalize employee pride, Rich Floersch, was hired from Kraft Foods as the new executive responsible for HR. His goal was to re-energize the employees through improved employee communications, and improved training. His leadership was a significant contributor to the brand turnaround.

When Merriam-Webster’s Collegiate Dictionary announced that “McJob” would be added to its dictionary as a word describing “low paying and dead-end work,” Jim Cantalupo reacted swiftly. In an open letter to Merriam-Webster, he argued that the term is “an inaccurate description of restaurant employment” and “a slap in the face to the 12 million men and women” who work in the restaurant industry. McDonald’s e-mailed the letter to media organizations around the world. Cantalupo also wrote that “more than 1,000 of the men and women who own and operate McDonald’s restaurants today got their start by serving customers behind the counter.”26 This kind of leadership passion and pride contributed to the rebuilding of employee pride. For successful brand revitalization, internal marketing must precede external marketing.

Cost Cutting Versus Brand Building

Brands get into trouble when cost management replaces brand management. Unfortunately, when brands get into trouble, the focus often turns to cutting costs rather than to brand revitalization. Cost managers become risk averse.

When a brand gets into trouble, enthusiasm and entrepreneurial spirit are often replaced by brand stubbornness. Standing still is for statues, not for brands. Brand lifelessness leads to brand losses, not to brand loyalty. The first step in brand revitalization is to face the facts of failure.

However, instead of trying to make each restaurant a more desirable destination, McDonald’s focused on cost reduction rather than on brand building.

  • + Share This
  • 🔖 Save To Your Account

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.

Overview


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information


To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.

Surveys

Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.

Newsletters

If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information


Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.

Security


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.

Children


This site is not directed to children under the age of 13.

Marketing


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information


If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.

Choice/Opt-out


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information


Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents


California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure


Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.

Links


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact


Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice


We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020