Introduction
An important aspect of a company’s successful marketing is its approach to pricing and distribution. By efficiently managing its expenditures and relations with other organizations, the business can communicate diverse benefits to potential customers while outstanding competitors. McDonald’s relies on a value pricing strategy, utilizes such tactics as product line pricing and price bundling, and has indirect channels of distribution with an intensive plan of action alongside e-commerce and e-retail.
Value Pricing as a Selected Pricing Strategy
McDonald’s selected pricing approach appears to be value pricing (VP). Due to the COVID-19 pandemic and rising inflation, the fast-food chain was expected to increase its costs for various materials (Haddon, 2022a). As a result, since the summer of 2022, McDonald’s has focused on higher fees alongside value menu offerings (Haddon, 2022b). VP aims to convey positioning through price, thus maintaining the relationship between the business and its clients (Marshall & Johnston, 2019). Accordingly, McDonald’s reports that the chosen strategy helped the company’s sales in the US (Haddon, 2022b).
However, the corporation’s revenue is likely to be threatened by inflation and debilitating consumer sentiment (Haddon, 2022b). While McDonald’s unique offers and higher menu prices expanded its quarterly deals, many of its restaurants are pressured by rising costs (Haddon, 2023). Therefore, McDonald’s seems to have recently concentrated on the VP strategy to explain increased fees to customers based on communicating value.
Effective Pricing Tactics in Stimulating Sales
The primary tactics employed by McDonald’s to stimulate sales are product line pricing (PLP), price bundling (PB), and odd pricing (OP). The fast-food chain utilizes PLP to provide clients with different fees on diverse items, such as paying extra to add a slice of cheese to a hamburger (Marshall & Johnston, 2019). On the other hand, McDonald’s relies on PB to encourage clients to purchase packaged deals represented by combo offerings like Happy Meal or McNuggets Meal (Gallagher, 2022; Marshall & Johnston, 2019). The company also utilizes OP to influence customers psychologically by suggesting that buying a certain product is advantageous due to the seemingly lower price (Marshall & Johnston, 2019).
For instance, depending on the area, a 10-piece McNuggets Meal is usually $14.09 but neither $14.00 nor $14.10 (Gallagher, 2022). The usage of the listed pricing methods has proven profitable for McDonald’s. For example, despite increased menu fees, Happy Meals, which comes with collectible figurines for adults, has assisted the business in expanding its recent quarterly deals (Haddon, 2023). Therefore, PLP, PB, and OP tactics are practical in stimulating McDonald’s sales.
The Distribution Channels
McDonald’s channels of distribution (COD) are represented by the relationships between manufacturers, retailers, and consumers. Scholarly marketing journals and practitioner publications do not seem to elaborate on the corporation’s COD. Nonetheless, McDonald’s relies on indirect channels with different intermediary levels, which can be seen in the example of the business’s offering of plant-based burgers (Marshall & Johnston, 2019). In 2021, California-based manufacturer of meat imitations Beyond Meat Inc. signed a contract to supply artificial patties and sausages to McDonald’s (Bunge, 2021).
Consequently, the fast-food chain can utilize Beyond Meat’s products in its plant-based menu items (Bunge, 2021). Accordingly, one can assume that McDonald’s receives other ingredients for its meals from distinct organizations while also interacting with such intermediaries as transportation companies. Therefore, McDonald’s has indirect channels of distribution, where firms like Beyond Meat Inc. act as food manufacturers, McDonald’s restaurants perform as retailers engaged in selling, and regular individuals are considered end-user customers.
The Distribution Strategy
The distribution approach that is relevant to McDonald’s products is an intensive strategy (IS). McDonald’s engages in franchising operations across the globe, including such countries as the US, Canada, Germany, the Netherlands, and Australia (“McDonald’s Corp.,” 2023). As a result, the fast-food chain has to appeal to a variety of clients and interact with multiple organizations. IS allows the business to obtain maximum product exposure by managing all intermediaries and retailers, which are the corporation’s worldwide restaurants (Marshall & Johnston, 2019). Accordingly, McDonald’s appears to employ IS of distribution due to having to work with many partners to deliver its products to consumers.
The Non-Traditional Methods of Distribution
McDonald’s uses non-traditional methods of distribution, such as e-commerce and e-retailing. For instance, the corporation has a mobile application as electronic media utilized by many active clients that support the business across the US (Jakab, 2022; Marshall & Johnston, 2019). Moreover, the fast-food chain has developed an interactive campaign to communicate with customers on the Internet with the help of an augmented reality filter (Nudd, 2023).
Notably, Dynamic Yield was another non-traditional method of distribution in McDonald’s. Although McDonald’s seems to have sold the digital start-up, the corporation relied on Dynamic Yield for three years to enhance sales at electronic kiosks and drive-throughs (Chin, 2021). McDonald’s uses its mobile application and augmented reality on the Internet for e-commerce and e-retailing.
Conclusion
To summarize, McDonald’s concentrates on a value strategy employ tactics like product line pricing and utilizes indirect channels of intensive distribution alongside some non-traditional methods. The COVID-19 pandemic and inflation pushed the company to determine how to increase its costs and prices but also meet clients’ expectations, thus leading the firm to VP. The business uses PLP, PB, and OP to encourage customers to purchase certain products and communicate with consumers in different ways while interacting with franchise partners and intermediaries.
References
Bunge, J. (2021). Beyond Meat signs supply deals with McDonald’s, Yum. The Wall Street Journal. Web.
Chin, K. (2021). McDonald’s to sell digital startup Dynamic Yield to Mastercard. The Wall Street Journal. Web.
Gallagher, J. (2022). With adult Happy Meals, McDonald’s sparks a collecting frenzy. The Wall Street Journal. Web.
Haddon, H. (2022a). McDonald’s says its costs to rise further in 2022. The Wall Street Journal. Web.
Haddon, H. (2022b). Higher menu prices lift McDonald’s U.S. sales but consumer outlook uncertain. The Wall Street Journal. Web.
Haddon, H. (2023). McDonald’s sales boosted by adult happy meals, price increases. The Wall Street Journal. Web.
Jakab, S. (2022). McDonald’s is cool again. The Wall Street Journal. Web.
Marshall, G. W., & Johnston, M. W. (2019). Marketing management. McGraw-Hill Education.
McDonald’s Corp. (2023). The Wall Street Journal. Web.
Nudd, T. (2023). How TikTok, McDonald’s, Apple and others are celebrating Lunar New Year. Ad Age. Web.