Introduction
The undisputed global leader in the fast-food industry is the American-born company McDonald’s. Statistics show that by 2020, there are over 39,000 McDonald’s locations worldwide, a number that has grown steadily over the past fifteen years (Lock, 2022). McDonald’s was founded in 1940 by two founding brothers, Dick and Mac McDonald, whose first fast food restaurant appeared in California (Amudan et al., 2018). Since then, the business has expanded aggressively through franchising, which is one of the main reasons for the widespread opening of stores in foreign markets. By 1962, the company had developed its own recognizable logo, a large yellow M, and created the mascot Clown (Rich, 2021). The company later became publicly traded on the New York Stock Exchange and actively attracted investments for its own development. By now, McDonald’s is a universally recognized foodservice brand, offering customers burgers, fries, desserts, combos, and any other products that are prepared in just a few minutes and immediately dispensed to the customer.
McDonald’s, on the other hand, has a relatively recent new marketing strategy aimed at increasing customer engagement. In particular, in 2021, the company launched a loyalty system that offers customers 100 points for each dollar spent; subsequently, these points can be used to purchase additional food or drinks (Nguyen, 2021). Such a solution is an excellent upselling strategy that helps a brand earn more money per customer and increases consumer engagement. This paper explores facets of such a solution and how the marketing model has really impacted the brand and its customer loyalty.
Exploring the Concept
Customer loyalty systems began to be actively implemented in companies when entrepreneurs realized that increasing brand profits was directly related to getting more money from the customer. However, it was impossible to raise prices and expect customers to agree to bring more money to the company â in fact, if the market price increased, there was a high probability that the customer would leave to a competitor (Soler & Thomas, 2020). Instead, the main challenge was to determine a model that would generate more profits and maintain customer loyalty. A loyalty system was a great solution to this problem because it not only increased sales but also rewarded the customer for their purchases (Rybaczewska et al., 2020). Today, loyalty systems are actively used by different companies and in different variations, and the example of McDonald’s reflects an excellent implementation of this.
Application and Reasoning
When McDonald’s consumers make purchases, they receive virtual points for doing so; the logic is that the more a customer spends in a single transaction, the more points he or she will earn. These points are then voluntarily spent by the customer on the products he or she wants. It is reported that the minimum threshold for turning points into products is 1,500 points (equivalent to $150), and the maximum is 6,000 points or $600 (Nguyen, 2021). The loyalty system described perfectly demonstrates the main goal for businesses, which is to increase profits. Nguyen points out that nearly one in two customers now spends more money at McDonald’s, with 47% of customers willing to recommend the brand to their friends. In terms of marketing strategies, this model excels at realizing McDonald’s fundamental goals and increasing customer engagement, who, in addition to purchasing the product, can receive virtual points as a gift (Schaarschmidt et al., 2021). This creates a sales cycle in which customers are willing to return to restaurants to make more purchases and accumulate more points. At the heart of such a business model is the marketing theory of increasing loyalty. Strictly speaking, this concept is not aimed at attracting new customers but instead aims to retain and maximize profits from current customers (Fook & Dastane, 2021). Through gifts that demonstrate brand appreciation for customer loyalty, companies build trust between the brand and consumers and encourage additional spending.
Theory and Argumentation
In fact, it is also possible to consider the applicability of a fundamental marketing concept in this model, namely Maslow’s theory of needs. According to this theory, the consumer closes his needs hierarchically such that the upper levels can only be closed when the lower levels are closed (Genkova, 2021). McDonald’s marketing management understands that the customer will then be able to cover their biological needs (eating out) and will feel safe within the establishment. Safety is also supported by a belief in the reliability of the app, which houses a virtual points account and presents a selection of products to be purchased with those points. In this case, McDonald’s also covers the third need in the hierarchy, namely the need for love and belonging. Through its system, the company demonstrates that it cares about customer loyalty, and it is willing to reward that loyalty. As a consequence, customers feel trust in McDonald’s and keep coming back to the restaurants.
In terms of the concept of producing more products, McDonald’s solves this need perfectly by introducing a loyalty system. In addition to the already existing production facilities, the company loads them even more heavily, which is caused by the need to prepare and actually free products. This ties the customer more strongly to the company’s products as the understanding develops that these products can be obtained not only for money but also for virtual points (Schaarschmidt et al., 2021). The brand places the customer’s needs at the center of its marketing campaign and understands that consumers are interested in getting the product at the lowest possible cost. In addition, the customer is given a choice among dozens of different dishes, which evokes a sense of importance and self-determination in the consumer (Gilal et al., 2019). As a result, rewarding with virtual points perfectly covers the needs described above.
Business Implications
The apparent result of this model is increased customer engagement and, as a result, increased profits. Consumers are willing to return to the restaurant and bring their friends, which expands the potential customer base. Even those who have not used the app before can download it and use it every time they buy, which increases customer loyalty and further connects them with the company. Finally, the company covers the need for innovation as it uses mobile apps to accrue and spend points, namely, demonstrating it as a modern, relevant brand.
Conclusion
To summarize, the customer loyalty system at McDonald’s is an excellent tool for increasing customer interactions and revenue growth. The essay demonstrated that the basis of such an idea is the brand’s desire to expand and maximize profits while retaining current customers. It was demonstrated that the loyalty system is based on Maslow’s model of needs and encompasses at least three lower levels. In addition, the company expands its food production, which increases the customer’s connection to the brand. McDonald’s also gives the customer the opportunity for self-determination by offering a voluntary choice of products to exchange for points, which increases trust. Ultimately, such a loyalty system can qualitatively increase profits and strengthen customer relationships, which is exactly what McDonald’s uses.
References
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