Wednesday, February 24, 2016

Jab They Failed- McDonald's Arch Deluxe || Daksh Bhagat || IIM Shillong || January 2016 edition

McDonald’s is known in every nook and corner of the World for offering hot, tasty hamburgers to the masses. Being masters of the “Dollar Menu”, they own the fast food industry by providing their food at a significant value. Then why are we discussing the brand under this section of the magazine today? Any guesses? When a brand fails to recognize the need of the hour, it begins facing some conventional marketing problems, which also happened with McDonald’s when it launched its new burger, Arch Deluxe, which failed to inspire consumers. 

In 1996, the Arch Deluxe debuted as a large hamburger patty on a soft potato-flour roll, with lettuce, tomato and a fancy mustard/mayo combo sauce. Marketed as the ‘Burger with the Grown-up Taste’, the idea was to have a burger which would shift the focus away from children. Indeed, the advertising campaign for the Arch Deluxe sent across the message of a sophisticated alternative of McDonald’s regular offerings with images of kids shying away from the ‘sophisticated’ product. With a $100 million advertising budget, the burger became successful in creating a huge build-up to the release. However, it never caught on with McDonald’s throngs of hungry fans. Reason sighted against the same were many. Some argued that it was overpriced. Others believed that the target market was inappropriately identified. Many people also speculated that the budget was misused and the burger in itself didn’t taste that great. 


Let’s try to understand what actually happened. The value propositions that McDonald’s has set for itself are friendliness, cleanliness, consistency and convenience, which fortunately its competitors have neglected to capture. The first consideration is that a regular customer never goes to McDonald’s for sophistication, rather goes for the convenience offered. On entering a McDonald’s restaurant, a customer gets the convenience of knowing what to expect. He does not want to be bombarded with a million and one different variations of essentially the same product- a hamburger. McDonald’s has never competed on taste, yet everybody comes back. 

Another trouble with Arch Deluxe was regarding the strategy of the burger to be sold on taste. This may have been the wrong approach to draw in consumers because it was seen as McDonald’s trying to be something it’s not: a culinary luxury that appeals to food connoisseurs. That may not have been the intent, but that became the perception that led to a major break down. Another ironical aspect of the Arch Deluxe failure is that the product was well researched. It was only after an extensive market research involving different demographic segments, it was concluded that people would love to eat a hamburger specially designed for adults. However, the target market that was supposed to be catered never turned up, thus proving Arch Deluxe to be an embarrassing flop. Last but not the least, McDonald’s is heavily centralized. Most of the marketing decisions need to pass through the company’s headquarters in Oak Brook, Illinois. In contrast to major product successes such as the Big Mac, the Hot Apple Pie, the Egg McMuffin and the Filet o’ Fish, which were all invented in operators’ kitchens out in the field, the recipe for Arch Deluxe came from the Oak Brook’s kitchen which is infamous for launching many such product failures. Have a look at one of the TVC's of the Arch Deluxe: https://www.youtube.com/watch?v=wE4JrM8OFts

 
However, the problems encountered with the Arch Deluxe are symptomatic of an even bigger problem. McDonald’s in the recent years has been accused of losing connect with the customers who never find it difficult to give up loyalty and hence has been rendered far behind in the market in terms of brand value. Indeed, this is a problem acknowledged by the company’s CEO, Jack Greenberg, who arrived in 1998. Quoting Jack, ‘we have been taking much too long to develop an idea and get it to the market, then too long to decide whether we want to do it or not’.


Finally let us look at the lessons we have learnt from the failure of Arch Deluxe: 
1. Go for what you know: Part of McDonald’s brand identity lies in its simplicity. Another part is defined by its children-friendly approach. A ‘sophisticated’ burger ignoring children was therefore destined to misfire. 
2. Avoid customer confusion: McDonald’s is not cognitive, it is reflexive. By extending its range with products such as the Arch Deluxe, Bratwursts, McTacos and McMussels, McDonald’s was creating a need for its customers to think and get confused. 
3. Be sceptical of research: Market research holds a special place when carefully conducted, but it should never be taken as gospel truth. Perception of the brand/product should always be taken care of, even if the research shows results in the opposite direction.

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