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In 1995 McDonald's was the largest restaurant chain in the USwith domestic sales of $15.9 bn

Country's fourth-largest advertiser, spending $490 mn on media

Big Mac, Egg McMuffin, QuarterPounder, Happy Meals

Friendliness, cleanliness, consistency

and convenience

Child-friendly approach, Ronald, brightand colorful interior, fun center, toys,food and the playground

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Domestic Sales in 1993 increasing at 4% annual rate

Sales slumped to 3% decrease by third quarter of 1996, fifth quarter in a row

In part, decline attributed to baby-boomers drifting away

Threat from competitors like King, Wendy’s, and Subway and falling market share.

Business strategy to keep their major

markets and expanding into emerging

markets

An attempt to offer more choice and to

win a new customer segment : a more

sophisticated adult.

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Introduced in May 1996 as the flagship of the adultline of burgers

$200 million dollar marketing campaign

Ads showed kids making “yucky faces,” turning uptheir noses at the new adult burger. Ronald engagedin “adult” activities like golf and pool 

Launched in 12,500 McDonald's restaurants in theU.S. and Canada

Consumer acceptance survey: consumers in focusgroups loved it, and 80% said they’d buy it 

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Arch Deluxe line of bacon, beef,fish, and chicken burgers.

Arch Deluxe Secret Sauce(mayonnaise and peppercornmustard)

1 sesame seed hamburger bun(potato roll style with split crown)

14 pound Topp's beef patty 1 slice American cheese 1-2 tomato slices 1-2 lettuce leaves, chopped 1 tablespoon ketchup 1 tablespoon chopped white onion McDonald's hamburger seasoning

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Arch Deluxe for $2.99 and an Arch Deluxe with Bacon for $3.29.

Price of an average Arch Deluxe kept at 32 cents higher than a BigMac - $1.90

McDonalds basic hamburger priced at 85 cents.

Burger King's 99-cent Whopper.

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Conflict of image – high quality, premium v/s cheap and

convenient

Product Quality Leadership - Simplicity not sophistication

Two basic arguments

o Priced too low v/s Big Mac

o Priced too high v/s regular burgers

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People are pre-decided about choice of burger

Too many variations

Sold on taste – people go for the brand

Alienation of one demographics hurt

Customization not possible

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Play down the mistake in Sept 1996 - “the Arch Deluxe was

never intended to be a silver bullet.” 

Mid August 1997 McDonald’s acknowledged the out of sync

pricing

Product pricing and not taste

Dropped to $1.00 and coupons

offered

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Tomato McGrand by McDonald’s Japan a decade later in 2003 

McFeast Delux in Australia in Nov 2009

Royal Deluxe in France

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Reference pricing plays a role in convenience snacks

Go for what you know

Avoid customer confusion

Be skeptical of research

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Abhishek Baneerjee (C04) Shraddha Chillarige (C12)

Vivek Hariharan (C24)

Manisha Kumar (C36)

Mythri Macherla (C40)

Kanchan Tiwari (C61)