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need a loyalty program

Why McDonalds Doesn’t Need a Loyalty Program

Jacob Brain

Author

You may or may not have heard the news that McDonalds is hiring a loyalty director for a predicted national loyalty campaign. In our opinion there is one huge reason that Mickey D’s does not need a loyalty program, and that is price.

McDonalds is the leading example of low-priced, commodity fast food. They introduced the Dollar Menu, constantly releasing lower prices, while still defining where thousands of American’s eat every day.  It would seem that they are in the leadership of the fast food category. Or are they?

What you might already know is that McDonalds has been winning the game based on this low price-high volume strategy, but it’s starting to catch up with them. Looking at this data from 2013, you can see that per store, McDonalds is only 2nd, with a few chains right on their heels. Having pushed margins down to accelerate growth has put them in a losing position, and now the loyalty program is the next token effort to course-correct this industry giant. Positioning loyalty as a discounting strategy to gain traffic is something we discourage.

So does McDonald’s really need a loyalty program?

In our opinion, what McDonalds needs to do is focus on product. Now, don’t get me wrong, I love a McDouble. And for 5 bucks I can get two of them plus fries and a drink. But the fast food brand has reached an inevitable equilibrium where low cost is now equal with low quality. Ask anyone if they think a McDonalds burger is high quality and they will likely laugh in your face. The loyalty McDonalds has reached is that it’s the first place I think of when I have less than 5 bucks to eat a meal. If I have 20-50 dollars to take my family out, it does not even appear on the radar. McDonalds needs to do something drastic in terms of product quality to bring in higher margin sales to the stores.

Instead of loyalty, establishing consumer delight and excitement around the products, or even branching off a new line of gourmet, not shipped in a box burgers, might do them well in the margins game. But to focus on loyalty as the problem is off the mark.

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