McDonald's Corporation

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McDonald's Corporation

CAMPAIGN 55 CAMPAIGN
DID SOMEBODY SAY MCDONALD'S? CAMPAIGN
I'M LOVIN' IT CAMPAIGN
WE LOVE TO SEE YOU SMILE CAMPAIGN

McDonald's Plaza
Oak Brook, Illinois 60523
USA
Telephone: (630) 623-3000
Fax: (630) 623-5004
Web site: www.mcdonalds.com

CAMPAIGN 55 CAMPAIGN

OVERVIEW

In 1996, McDonald's, the world's biggest fast food restaurant chain, found itself in a proverbial pickle. A tight labor market, additional costs resulting from minimum wage increases, and price pressures on raw materials sent the burger giant's operational costs spiraling upward, which in turn helped to depress profits. All this came at a time when McDonald's major rivals, Wendy's International and Burger King Corporation, were using innovative marketing strategies to eat into the Golden Arches' share of the pie.

McDonald's first attempt to arrest these trends was the May 1996 introduction of the Arch Deluxe, a "premium" sandwich targeted at adult consumers. The strategy seemed valid at a time when inflationary forces were ascendant in the economy. In order to sustain profits, McDonald's needed to develop a product consumers would be willing to spend more money on. The only problem was that the Arch Deluxe proved to be unpopular with consumers. Furthermore, the ad campaign designed to promote the new entree featured grimacing children clearly turned off by the new "grown-up" burger. McDonald's had consequently alienated one of its core markets—little kids—in pursuit of invigorated sales to adult customers. As Arch Deluxes piled up on warming racks waiting for consumers who were not buying them, the burger giant scrambled to rethink its approach.

The result was an ambitious price-cutting promotion that seemed to fly in the face of the economic winds that had spawned the Arch Deluxe. The new campaign was heralded by months of anxious anticipation. In a statement to the press at the end of 1996, McDonald's announced that it was "on the threshold of an unprecedented value offering that will be good news for our customers, our franchisees, and our business … and bad news for the competition."

Consumers across the country got a taste of the new direction almost immediately. As of April 11, 1997, price promotions began to figure more prominently in McDonald's national advertising. Before then, these efforts were usually focused on the local or regional level. After two weeks of "national price point advertising," the new national campaign began on April 25, 1997. Dubbed "Campaign 55" for the year McDonald's was founded, the promotion lowered the price on a rotating slate of sandwiches with the purchase of french fries and a soft drink. A similar deal was launched on a rotating basis through the chain's breakfast menus. The value pricing plan was accompanied by a new advertising campaign, "My McDonald's," created by the Leo Burnett Agency, McDonald's longtime ad partner. As the overall architect of the campaign, Burnett received the bulk of the ad work, although McDonald's other roster shops, DDB Needham Worldwide and Burrell Communications, also received some assignments.

The stakes were enormous. McDonald's was luring its customers into restaurants with a 55-cent promise and risking their anger when they were hit with a $1.79 actual price tag after the mandatory purchase of fries and a drink. If consumers refused to accept the deal, they could view McDonald's as having reneged on a promise. More importantly, the chain's pursuit of sales volume came at the expense of franchisee profitability—a strategy that threatened to erode the sometimes tenuous bonds of trust between the parent company and its retail partners. "Campaign 55" would prove to be a marketing debacle for McDonald's and its partners at Leo Burnett. When the dust settled, the landscape of two of America's signature industries—fast food and advertising—had been dramatically changed.

HISTORICAL CONTEXT

In 1982 McDonald's, citing the need for a bigger agency, jettisoned Needham in favor of its crosstown Chicago rival, Leo Burnett. One of Burnett's first campaigns introduced consumers to the children of "Camp Nippersink," solidifying the burger giant's hold on the kids' market. By 1988, however, the Golden Arches began a long-term effort to win the hearts and minds of the adult dinner crowd. One of the first campaigns in this initiative, "Mac Tonight," parodied a familiar Brecht-Weillsong—to little apparent effect. The Arch Deluxe failure was thus only the last in a series of unsuccessful attempts to secure the adult market. That misstep, compounded by eight straight quarters of declining sales, prompted McDonald's executives to rethink its marketing approach. The end result was "Campaign 55."

In a December 1996 memo, McDonald's Chairman Jack Greenberg outlined the burger maker's overall market strategy. He wrote of the company's intention to "reenergize and focus … U.S. marketing efforts and develop a national value proposition." It was a significant departure for a company that had always offered its price promotions on the local and regional level. In late February 1997, several senior Burnett executives met at McDonald's Oak Brook, Illinois, headquarters to map out an advertising strategy for "Campaign 55." At the same time, McDonald's franchisees were being briefed on the new pricing strategy via closed-circuit television. Shortly thereafter, franchisees were given a chance to approve the national discount plan. At least 75 percent of the burger maker's 2,700 owner-operators needed to give a thumbs-up in order for the plan to go forward. They did so, but not without trepidation. Many owner-operators viewed the pricing plan as a drastic, even desperate move and an overreaction to the sales slump. Some expressed skepticism about whether the "home office" had done the research to make certain this was what consumers wanted. Many of these reservations would prove to be prescient in the weeks and months to come.

On April 4, 1997, McDonald's restaurants across the United States began offering 55-cent Egg McMuffin breakfast sandwiches with the purchase of hash browns and a drink. Three weeks later, on April 25, the promotion was expanded to Big Macs as well. Quarter Pounders were next up in the rotation, with their price reduction commencing in mid-June. McDonald's dedicated $66 million worth of national advertising to the value-pricing plan, much to the dismay of some regional shops, which had benefited enormously when McDonald's diverted $150 million from national to regional advertising in 1996.

TARGET MARKET

As a national campaign with an enormous advertising budget, "Campaign 55" was theoretically aimed at all fast food consumers across the United States. But in a fast food market dominated by large chains, the real target was those consumers who had strayed to other burger purveyors on the issue of value pricing. In the late 1990s, fast food was one of the most developed sectors in the restaurant industry, with the fast food hamburger category being perhaps the most competitive; there seemed to be McDonald's, Wendy's, and Burger King outlets on most every corner. And consumers were using increasingly sophisticated criteria to decide where and how to spend their money. In this environment the goal for these companies was market share gain.

McDonald's aim with "Campaign 55" was to convince customers to visit its restaurants instead of its competitors. Very often a promotion like a price-cutting program can play a big part in convincing the customer. Wendy's, with its 99-cent Super Value Menu, and Burger King, with its 99-cent Whopper and $2.99 Whopper Meal Combo, had stolen away some of McDonald's pricing edge, and had scored notable market share gains. McDonald's hoped that customers who had been wooed away by the promise of value would respond favorably to "Campaign 55."

COMPETITION

For quite some time, McDonald's had understood the root of its troubles: smaller chains were using seemingly tastier, more diverse menus and shrewd marketing to eat into their market share. Burger King in particular relied on product-focused ads to score sales increases of 2.6 percent per store for the year ending September 30, 1996.

While McDonald's overall sales remained strong, the company felt it had to do something to stem the market share erosion. It responded initially by opening more restaurants. The thinking was that even if store volume did not increase, sales would go up because of the increased number of stores. In addition McDonald's could collect more rent and franchise fees. But franchisees soon called for a halt in expansion. They found their own profits plummeting as new outlets opened up close by, cannibalizing their sales. A program to introduce new sandwich items, such as the Arch Deluxe, also failed. McDonald's seemingly was left with no alternative but to slash prices.

As word leaked out about the nature of the promotion, industry observers began to fear a burger price war. The prospect of falling profit margins helped to depress stock prices for McDonald's and its major competitors, Wendy's International and Grand Metropolitan, the parent company of Burger King Corporation. Both companies rushed to announce that they had no plans to match McDonald's price cuts. "We've attached ourselves to a strategy that states it's not a great value if it's not a great tasting burger," said Andy Bonaparte, Burger King's director of advertising.

While the Golden Arches was using its partnership with the Walt Disney Corporation to tie into that company's 1997 summer movie releases, Burger King returned fire with adult-targeted tie-ins to the blockbuster film Jurassic Park: The Lost World starting on Memorial Day weekend. Ads for that onslaught were created by Ammirati Puris Lintas of New York. In a special promotion aimed at children, BK Kids Meals were offered with giveaway toys from director Steven Spielberg's The Land Before Time video series.

MARKETING STRATEGY

McDonald's marketing officials expected the value price promotion to spur consumer traffic and nudge patrons into paying full price for the chain's higher-margin french fries and soft drinks. Accordingly, the chain advised its franchisees to increase on-hand packaging and food supplies by 10 to 15 percent in anticipation of a corresponding hike in sales.

While the focus of the campaign was national, the media plan called for a window of local spot promotions in April 1997. McDonald's envisioned "Campaign 55" as an integral part of a summer marketing blitz tied to the June release of the Walt Disney Company's animated feature Hercules and the comedy-adventure film George of the Jungle in July. "Campaign 55 is not a short-term promotion," declared McDonald's spokeswoman Anna Rozenich. "It's designed to increase restaurant profit and cash flow over a long period of time." Indeed, the burger giant planned its marketing calendar around "Campaign 55" well into 1998, the idea being that every month or so a different sandwich would be featured at the discounted price. Initially, the price reduction was to be accompanied by a promise to offer the customer free food if an order was not served within 55 seconds. After complaints from owner-operators about the feasibility of this and all aspects of the marketing plan, however, this feature was abandoned.

Coincident with the April 4 price reduction promotion was the debut of the "My McDonald's" national television campaign created by Leo Burnett. The commercials showed McDonald's owner-operators and restaurant workers expressing the company's core values. Its only seeming relation to the price promotion was the emphasis on the year 1955—the year McDonald's was founded and when the "core values" presumably were formulated. "This is not in the least a price promotion," remarked McDonald's senior vice president of marketing Brad Ball.

LATE-NIGHT PUBLICITY

An old adage says that there is no such thing as bad publicity. But some say that an even older adage dictates: stay out of the monologues of late-night talk-show hosts. The latter could be a sure sign that one has turned into a national joke. And yet that is just what happened to venerable national icon McDonald's in the wake of its much maligned "Campaign 55" promotion. Late Show gabber David Letterman was the emcee for a round of good-natured knife twisting that took the form of a Top Ten List citing "Other Failed McDonald's Promotions." Among the "promotions" on Letterman's list were: "Happy Meals include small containers of nitrous oxide"; "Get 500 Quarter Pounders for the price of 499"; and "Buy any sandwich and have clown makeup permanently tattooed on your face." "The 55-cent McCoronary" topped the list.

The new strategy carried with it a number of inherent risks. First, it seemed to run counter to the economic trends of the day. With operational costs rising, a drastic cut in prices put McDonald's two strikes down in the effort to spur profit margin increases. This was difficult, especially for franchisees, who had already seen their margins erode due to the company's aggressive expansion program. Another risk McDonald's had taken was embarking on a dual campaign. In doing so, they faced one of marketing's toughest challenges: boosting sales while building a brand identity at the same time. There seemed to be little doubt that McDonald's needed to do both. Superior brand advertising by Burger King and Wendy's was having the effect of luring away once-loyal McDonald's customers; the accompanying drop in sales meant McDonald's had to sell more food. But the quest for a quick sales spike is not always consistent with the long-term goal of building a brand identity.

OUTCOME

Reaction to "Campaign 55" was sharply negative from its inception. Many observers were taken aback by the degree of discounts offered. Others saw the abrupt shift in strategy as a sign that McDonald's was confused about its marketing direction. "For the past year, McDonald's has bounced around in terms of its marketing strategy," said Stacy Jamar, a restaurant analyst with Smith Barney, "from last year taking the high road with deluxe sandwiches to this year's pseudo price discount." "I don't think it's a viable long-term solution to the problem they have in the U.S., which is a product problem," declared Damon Brundage of NatWest Securities. Indeed, many analysts saw "Campaign 55" as little more than a quick-fix—a pricing gimmick designed to stop the decline in sales while the company scrambled to devise and implement a real solution to its long-term problems.

For a while, the burger giant ignored these brickbats. The program had achieved some success at the breakfast level, because it spurred sales of combo meals, raising the average customer's bill. And in mid-May, McDonald's announced that unit sales of its Big Mac sandwich had more than doubled since the price reduction. The company enjoyed its strongest comparable April store sales in years. But part of that boost could be attributed to a popular "Teeny Beanie Baby" toy giveaway promotion that same month.

While official figures showed a spike in sales, there was anecdotal evidence to suggest that restaurants were not, in fact, selling more Big Macs than when the promotion began. And any increase in traffic was offset by customer confusion about where the deal actually was. "It's a price promotion that doesn't tell you the price," scoffed Ron Paul, an industry analyst and president of Technomics. His concerns were echoed by McDonald's owner-operators. "I think it's because the offer is confusing," said Dick Adams, the chairman of an independent association of about 100 McDonald's franchisees. "Customers come in expecting to buy a 55-cent Big Mac and they have to buy a conventional meal package." Many customers complained that they did not realize they had to buy fries and a drink to get the 55-cent price deal on their sandwich. Some customers quickly learned to supplement their entree with just a small drink and small fries. Under this arrangement franchisees found they actually lost money.

The ad campaign also proved to be ill-fated. There was considerable confusion over how the pricing plan tied in to the brand-building "My McDonald's" ad theme. As many analysts had predicted, the objectives of the dual ad campaign were not always complementary. While "My McDonald's" tried to build up an image for the brand, "Campaign 55" seemed to drag that image down by concentrating on dollars and cents details.

Finally, in mid-June, following an avalanche of bad press and a near revolt among franchisees, McDonald's discontinued the lunch and dinner components of "Campaign 55." The burger giant moved rapidly to devise a local price initiative to replace the national discount program. That move came as McDonald's prepared to implement a decentralization plan that divided the United States into regions in order to allow regional executives more power to make marketing decisions. And in August 1997, the other shoe finally dropped on "Campaign 55." Following a lengthy review process, McDonald's dropped Leo Burnett as its lead national ad agency and awarded the bulk of the estimated $350 million account to DDB Needham. This closed the book on what analysts considered one of the biggest misfires in marketing history.

DID SOMEBODY SAY MCDONALD'S? CAMPAIGN

OVERVIEW

The world's largest fast-food chain by a sizable margin, McDonald's had experienced many years of unbridled growth, but it had faltered in the mid-1990s. Many blamed errors of judgment in marketing, including the introduction of an unpopular burger called the Arch Deluxe in 1997 as well as a confusing discount offer on the chain's signature Big Mac hamburger in 1998. McDonald's, it seemed, had lost sight of the strengths that had made it the industry leader, most notably a keen sense of image that had been burned into customers' minds in the 1970s with classic advertising campaigns such as "You Deserve a Break Today."

As part of its efforts to rejuvenate its image, the company in late 1997 introduced the "Did Somebody Say McDonalds?" campaign with television spots aired throughout the United States. This marked the return of DDB Needham, the advertising agency that had worked with McDonald's from 1971 to 1981 during some of the company's best advertising years. DDB creative director Bob Merlotti created the tagline for the campaign, which ran throughout 1998 and into 1999. Specific spending on "Did Somebody Say McDonald's?" was not disclosed, but McDonald's reportedly spent $604 million on advertising from June 1996 to June 1997. This represented a 12 percent increase over the previous 12-month period.

With "Did Somebody Say McDonald's?" the company sought to return to the ground it had lost—both in the market and in the hearts of its once-loyal customers. But despite the optimistic outlook for the campaign, it failed to drive business and increase sales. In 1999 the company built on the campaign when, at a cost of $100 million, it introduced a local brand-building effort featuring singer Donna Summer. The following year a new campaign, "We Love to See You Smile," was released, replacing the "Did Somebody Say McDonald's?" campaign.

HISTORICAL CONTEXT

In 1948 brothers Dick and Mac McDonald opened the first McDonald's restaurant in San Bernardino, California. Several years later Chicago entrepreneur Ray Kroc happened to stop at the restaurant while on a business trip to Chicago and was instantly taken with the idea. Kroc inked a franchise agreement with the McDonald brothers in 1954 and the following year opened a McDonald's of his own in Des Plaines, Illinois. Fascinated by the idea of mass-producing and selling hamburgers, Kroc improved handsomely on the McDonald brothers' marketing ideas and by 1957 owned a string of McDonald's in the Midwest and California. Four years later he paid the McDonald brothers $2.7 million for their share.

Already by 1962 the chain had sold one billion burgers, and it charted its sales progress with a sign proudly displayed beneath the distinctive "Golden Arches" logo that set its facilities apart from all other fast-food chains. Of course, McDonald's had much more that set it apart: from the beginning Kroc had been taken with the simplicity of the McDonald brothers' stores, most notably the fact that these lacked the clutter typical of most roadside hamburger stands. As he began franchising units—which he did at a rate of more than 500 a year during the 1970s—Kroc issued stringent guidelines regarding virtually every aspect of restaurant operations.

McDonald's signature clown, Ronald McDonald, made his first appearance in 1963, and future years would find him with an array of friends, such as Mayor McCheese. Also in 1963 McDonald's offered its first menu extension, the Filet-O-Fish. Ronald and the expanded menu—which later included breakfast, chicken items, and salads—would become such fixtures of McDonald's that it was hard to imagine a time when they did not exist. Similarly, by the 1990s it was difficult to picture a McDonald's without a drive-through window, but these only made their appearance in 1975.

With the death of Kroc in 1984, McDonald's entered a new era. It expanded rapidly overseas as its U.S. operations began to run up against the inevitable: McDonald's had been so successful in the United States that it seemed likely, or at least possible, that the market would become saturated. Indeed, McDonald's executives would boast that the average customer had to drive no more than four miles to get to the nearest McDonald's. With more than 12,460 restaurants in America by the 1990s, there was one McDonald's for approximately every 290 square miles of U.S. territory; given the fact that the American landmass included vast uninhabited areas in Alaska and the West, this was an impressive figure indeed.

TARGET MARKET

Still, McDonald's sought to work its way into new U.S. markets. Thus in 1993 it began placing restaurants inside the ultra-popular Wal-Mart stores, following a trend toward fast-food restaurants in large retail facilities. By the mid-1990s, however, it seemed that McDonald's had lost sight of its market, as two costly marketing failures seemed to suggest. In 1996 there was the Arch Deluxe, promoted as a burger for adults—as opposed to most McDonald's fare, which, like Ronald McDonald himself, was targeted to children.

The problem with the Arch Deluxe was its relatively high price tag of $2.29, making it the most expensive single item on the McDonald's menu. Marketing for the Arch Deluxe, including billboards featuring children complaining about the "grown-up" burger, did little to spur sales. McDonald's followed this in 1997 with "Campaign 55," a discount promotion offering the signature Big Mac burger for a mere 55 cents. Instead of drawing in more customers, according to Harry Berkowitz of Newsday, this promotion merely "confused and annoyed" them.

"Some marketing experts," Berkowitz wrote in September 1997, "say McDonald's is wrong to focus on whether its burgers are better than the competitions, rather than on its warm, all-American family image." Said industry analyst John Grace, "They lost sight of what the brand stood for. They need to recapture the essence of the McDonald's brand, which is not in the products but in the consumer's mind." Louise Kramer of Advertising Age wrote in May 1999 that many consumers and others rooting for McDonald's in the burger wars wished for a return to the values expressed in the brand's classic "You Deserve a Break Today" campaign created by 1971 by Needham, Harper & Steers, an earlier incarnation of DDB Needham.

As McDonald's faltered during the 1990s, however, it was easy to put too much focus on what the company lacked and not enough emphasis on what it possessed. This was the position of Newsweek International, which in November 1997 listed a number of assets. Among these was "Happy hunting abroad." In contrast to the threatened saturation of the U.S. market, "each day, less than 1 percent of the people on the planet eat McDonald's. That's a lot of mouths yet to feed." There was also "A bodacious brand name. Last year McDonald's trumped Coke as the best known worldwide." And then there was perhaps the most important asset of all: "A lock on the hearts and tummies of American kids—and exclusive rights to Disney promotions through 2006. By then, the population of school-age kids could hit record highs—with record allowances."

COMPETITION

McDonald's was unquestionably the leader of the U.S. burger-chain market and of the fast-food market as a whole. In 1996 it had sales of $16.4 billion, dwarfing the $7.3 billion of Burger King. In fact, McDonald's sales exceeded the combined receipts of Burger King, third-place Pizza Hut, and fourth-place Taco Bell. Fifth in the fast-food market, and third among burger chains, was Wendy's, with $4.4 billion in sales. Next came KFC, followed by seventh-place Hardee's, a burger chain with $3.1 billion in sales in 1996. Below Hardee's were three non-burger chains: Subway, Domino's, and Arby's. In the burger market McDonald's in 1996 held a whopping 42 percent share, compared to Burger King's 19 percent and Wendy's 11 percent. Hardee's held a little more than 7.5 percent, and California-based Jack in the Box an additional 3 percent. All other burger chains rounded out the segment, with a 17 percent share.

Yet by the time it released "Did Somebody Say McDonald's?," the company faced extraordinarily stiff competition from Burger King. Berkowitz wrote, "Customers are gobbling up so many Big Kings—the chain's new, beefed-up version of its archrival's Big Mac—that [New York franchise owner Joe Della Monica] had to take down store signs promoting it at a sale price of 99 cents to avoid running out." This was welcome news to Della Monica, who said that four years earlier, in 1993, "We were in survival mode." At that time Burger King, owned by Britain's Grand Metropolitan PLC, was suffering under an advertising campaign "featur[ing] MTV grunge star Dan Cortese and the loud slogan 'I Love This Place,'" Berkowitz noted. In 1997, by contrast, it ran appealing commercials built around classic songs such as the Troggs' 1960s hit "Wild Thing."

ALGUIEN DIGO MCDONALD'S?

In March 1998 McDonald's unveiled six new Spanish-language spots designed to appeal to Hispanic customers. All featured the company's tagline, "Did somebody say McDonald's?," only in these commercials, created by del Rivero Messianu of Coral Gables, Florida, it was "Alguien digo McDonald's?" Three of the spots were tied to a recent Monopoly game promotion, and others promoted Happy Meals, French fries, and breakfast items. In "Point of View," which, according to Katy Eckmann and Scott Hume of Adweek, was the company's first image ad for Happy Meals, a man harangued his wife with a tale of a tough day on the job. All the while his young son listened thoughtfully, and then he offered his father a McDonald's Happy Meal.

Meanwhile, McDonald's floundered. In an effort to counter the Big King, it test-marketed the Mega Mac, an imitation of Burger King's Whopper that went nowhere. But the Whopper was flame-broiled, while the Big Mac was fried—another negative in the eyes of many consumers eager to minimize fast-food fat. Worse, McDonald's could not compete adequately with either Burger King or Wendy's in the area of special orders. The setup in McDonald's stores was simply too rigid to make special requests anything but a time-intensive exception to the rule; Burger King, by contrast, had proudly announced its ability to handle special orders with the "Have It Your Way" advertising campaign of the 1970s, which had imprinted on the consciousness of millions of customers. McDonald's in 1998 and 1999 experimented with new systems to aid in preparing special orders and to allow it to serve fresher product, as Burger King and Wendy's did, rather than allowing burgers to age under a warming lamp until someone bought them.

MARKETING STRATEGY

The "Did Somebody Say McDonald's?" spots first aired in October 1997. One showed a young man and young woman on a date in a movie theater; when the man turned to the woman and asked if she wanted to go to McDonald's after the movie, an actor on the movie screen asked, "Did somebody say McDonald's?" This caused a general stampede out of the theater, as moviegoers abandoned the feature in favor of the nearest Big Mac. Another spot showed an office worker who innocently announced to his colleagues that he was stopping by a McDonald's and would pick up a burger for anyone who needed one; before he could get out the door, he was besieged with requests.

Of the spots, which would continue airing throughout 1998, an industry analyst told Heather Pauly of the Chicago Sun-Times, "McDonald's has been playing by the other guy's rules by getting overly involved in price rather than reminding people of the emotional part of the product. I think this campaign does that." Likewise Courtney Kane, reporting for the New York Times, noted that "The goal of the campaign … is to bring back warm, fuzzy feelings about the purveyor of Quarter Pounders and Chicken McNuggets."

Meanwhile, McDonald's management and staff at its research kitchens worked on a reconfiguration of the production process so as to provide customers with fresh—and custom-made—burgers. They also experimented with a product called the Big Xtra, or MBX, as it was called at corporate headquarters. If successful, the Big Xtra would simultaneously replace the failed Arch Deluxe and take on Burger King's Whopper. McDonald's CEO Michael Quinlan also expressed an interest in revamping one of the company's most recognizable symbols, Ronald McDonald. "I think we can punch him up a little," Quinlan told Ralph Raffio in Restaurant Business. Raffio noted that the head of McDonald's marketing had indicated that Ronald might be due for a "tweaking." In the future, he suggested, McDonald's famous clown might even age a bit.

OUTCOME

In March 1999 McDonald's announced that it would invest a staggering $100 million in new local brand-building advertisements featuring singer Donna Summer. The latter would sing a version of her 1983 hit "She Works Hard for the Money," only instead of "She works hard for the money / so you better treat her right," the McDonald's jingle would say, "You get more for the money / 'cause McDonald's treats you right." It was the first time Summer—best known as the sexy queen of 1970s disco—had ever rerecorded a song for a commercial. In fact, she recorded it several times, in eight different styles, including swing, big-band, and country versions.

Arnold Communications, which handled local advertising for McDonald's, created the Summer commercials, but the idea of using the song was the brainchild of Maryland franchisee Cathy Bell. When she suggested it before a cooperative of local McDonald's franchisees, response was enthusiastic. Summer proved agreeable to the idea, and Bell told June Arney of the Baltimore Sun, "When I was told [Donna Summer] had agreed to a contract, I said, 'Wow, is this really happening?' Even if you didn't grow up when that song was around, you can relate to it. It's hip. It brings a jazzy overtone to the lyrics." At the end of the commercial Summer whispered, "Did somebody say McDonald's?"

From the introduction of the tagline in 1997, responses to the campaign had been mixed. Yet "Did Somebody Say McDonald's?" harkened back to the classic McDonald's image campaigns of the 1970s as few campaigns since then had managed to do. The company hoped that, given time—and some restructuring both in corporate operations and kitchen management—the tagline would capture popular sensibilities. But in 2000, as McDonald's dismal sales trend continued—a report in Crain's Chicago Business noted that sales averages were up 1.5 percent as a result of increased prices but that actual transaction counts were down about 6 percent—the "Did Somebody Say McDonald's?" campaign was discontinued. Replacing it was "We Love to See You Smile.," a $500 million effort created by DDB Needham.

I'M LOVIN' IT CAMPAIGN

OVERVIEW

By 2003, after nearly 50 years as the king of fast food, McDonald's Corporation was suffering an identity crisis. As Time magazine reported, "The challenges facing McDonald's come supersized. Its home market is all but saturated, its sterling reputation for fast, friendly service and cleanliness is tarnished, and customers are putting a growing premium on freshness and taste, neither of which McDonald's is renowned for." In addition, the company's revenues were shrinking, and it had lowered its earnings expectations for 2002. To reconnect with customers, the company planned remodeling projects in more than half of its U.S. stores, it revamped its menu offerings to include healthier choices, and, to rebuild brand identity, it launched a worldwide marketing campaign, "I'm Lovin' It," featuring singer Justin Timberlake.

Timberlake, however, was suffering his own identity crisis—he had been booed and pelted with water bottles by concertgoers during a performance in Canada—and some McDonald's executives were initially reluctant to sign a spokesman who was unpopular with the type of consumers the company was trying to reach. Nonetheless, Timberlake received a contract worth almost $6 million, and the "I'm Lovin' It" campaign was launched in 2003. Developing the campaign was a combined effort by McDonald's, ad agency DDB Chicago, and the German-based agency Heye & Partner, a division of DDB Worldwide. The campaign featured five television commercials with appearances by Timberlake that focused on the adult market. There were other spots created to "maintain the emotional connection the McDonald's brand has with families and kids," according to a report in the New York Beacon. In addition to the television spots, the campaign included window posters, signs on outdoor poles, ceiling danglers, and special kiosks. Advertising Age estimated the total budget to be $100 million.

The worldwide campaign, the first-ever global marketing effort for McDonald's, was introduced in Germany rather than the United States. As David McHugh reported in the Bergen County (NJ) Record, "Germany was chosen as launch venue because the slogan was dreamed up by a German ad agency, Heye & Partner." The new slogan replaced the company's previous tagline, "We Love to See You Smile," which had been introduced in 2000. Following its launch in Germany, the campaign kicked off in 100 other countries, including the United States. In 2004 the new marketing strategy paid off when Advertising Age named McDonald's the Marketer of the Year for the "brand's marketing achievements around the world."

HISTORICAL CONTEXT

As McDonald's celebrated it 50th anniversary in 2005, the company also could celebrate maintaining its lead in the fast-food burger race. According to PR Newswire, the company had grown from one restaurant in Des Plaines, Illinois, to more than 30,000 restaurants, most independently owned and operated, that served almost 47 million people in more than 100 countries every day. In a 2002 Time magazine article Daniel Eisenberg wrote, "McDonald's opens a new store somewhere around the globe every eight hours." Sales had climbed from $366.12 on opening day at the first restaurant to more than $19 billion in 2004.

In response to competition from other fast-food chains, such as number-two Burger King, and a crowded restaurant market that offered consumers upscale "fast-casual" dining options, McDonald's went on a mission to win customers and revitalize its business. Eisenberg reported that the company planned to bulldoze as many as 1,000 of its aging restaurants and give face-lifts to about 6,000 others. "Remodeling more than half its 13,099 U.S. restaurants, which could cost the company as much as $800 million over the next two years, is only part of CEO Jack Greenberg's latest plan to get bloated old Ronald McDonald back in shape," Eisenberg said.

Greenberg's plans included rolling out a "dollar value menu" for price-conscious customers, adding healthier choices to the menu, and developing new restaurant formats. The last included sit-down diners that would offer home-style menu items like meatloaf and chicken-fried steaks or three-in-one stores that would serve traditional burgers and fries along with Boston Market chicken and Donatos pizzas, both of which, as Eisenberg noted, were owned by McDonald's. In addition, Greenberg proposed launching a $20 million national ad campaign to promote its dollar menu items.

Dave Carpenter, business writer for AP Worldstream, reported that when James Cantalupo took over as McDonald's CEO in 2003 he introduced additional changes, including renewed efforts to "eliminate shoddy service, improve speed and add new menu items, including an entreée-sized salad and the McGriddle breakfast sandwich." Among other changes was the launch of the company's "I'm Lovin' It" campaign, designed to work in all languages and to dispel the chain's image as a fading icon by portraying it as "forever young."

TARGET MARKET

According to Carpenter, the "I'm Lovin' It" campaign was designed to attract "younger and hipper consumers … It's aimed at helping the restaurant chain connect better with customers—especially young adults, moms and kids." He reported McDonald's chief marketing officer as saying, "We know we need to be more modern and more relevant in how we communicate to today's consumers." Charlie Bell, the company chief operating officer, added that, besides appealing to young consumers, the campaign would "be fun, it'll be relevant, it'll be hip, it'll be compelling, and it will connect with people of all ages."

Rance Crain, writing in Advertising Age, said that McDonald's "all-or-nothing bet on the youth market" was a risk. Referring to an ad featuring a cameo by singer Timberlake, Crain wrote, "I think I can say without fear of contradiction that the commercial is off-putting to most of the non-target market … If it doesn't register with kids, the corporate campaign could have a negative impact overall, and McDonald's will have spent $100 million for the privilege of alienating vast swatches of its customers."

COMPETITION

As the Evansville [IN] Courier & Press reported, "McDonald's and Burger King have been going burger-to-burger for more than 30 years, with Wendy's and smaller companies also fighting for consumers' hearts and appetites." Faced with its own declining sales and with competitor McDonald's increasing sales, explained in part by its "I'm Lovin' It" campaign, number-two Burger King launched a counterattack in the burger wars with the reintroduction of its popular "Have It Your Way" slogan and with its "Lunch Break Gang" television ads, which featured a group of 20-something coworkers ordering lunch their way.

The Burger King campaign did not have strong positive results with consumers, however, with USA Today reporting that only 14 percent of those familiar with the ads liked them and thought they were effective, while 30 percent of the people polled said that they did not like the ads. Nevertheless, the Burger King campaign won the Silver Award at the 2004 Cannes Lions and a Bronze Award at the Clios. More importantly, the campaign had a positive effect on Burger King's sales, with increases reported for 10 consecutive months following its launch in February 2004.

Number-three Wendy's responded to declining sales and the 2002 death of company founder and spokesman Dave Thomas by launching a marketing campaign in 2005 that AdAge.com reported was created to help the company "shed its folksy image and one-size-fits-all message." The new theme, "Do What Tastes Right," also was designed to appeal to the chain's core customers—baby boomers—as well as to attract young adults and those in their early teens, Wendy's customers of the future. The marketing budget was increased, and for the first time the company ventured into Internet advertising.

MARKETING STRATEGY

As PR Newswire observed, the "I'm Lovin' It" campaign was "a key part of McDonald's business strategy to connect with customers in highly relevant, culturally significant ways around the world." Part of that strategy was to shoot the "I'm Lovin' It" commercials in various locations worldwide. Jim Kirk reported in the Chicago Tribune that filming was done in Prague in the Czech Republic, Rio de Janeiro in Brazil, Johannesburg in South Africa, Singapore, and other international locations. Larry Light, executive vice president and chief global marketing officer for McDonald's, told the New York Beacon, "The high energy launch in the U.S. is further proof that this global campaign is far more than just advertising or a new theme line. It is a multidimensional approach to customers around the world that goes from television sets and computers to our restaurants … and everything in between."

Mike Roberts, president of McDonald's USA, told PR Newswire that the "theme and attitude of this full-scale campaign is being integrated into every aspect of the business … from crew training and the overall restaurant experience to national sponsorships, promotions and all new local street marketing." He added that the company was "focused on bringing the 'I'm lovin' it' theme to life not only in our advertising but also for every customer who visits our restaurant. This world-class marketing strategy is the latest element of our overall plan to continue revitalizing McDonald's."

In an interview reported by PR Newswire, Timberlake commented on his role in the McDonald's advertising campaign: "I love what McDonald's is doing with this new campaign and it's cool to be part of it. We share the same crowd … people who like to have fun … and that's what this new partnership is all about." In addition to the television spots featuring Timberlake, appearances by the singer were scheduled in selected markets in the United States and Europe, and he performed in a U.S. concert tour titled "McDonald's Presents Justin Timberlake Lovin' It Live." Dean Barrett, McDonald's senior vice president for global brand business, told Advertising Age, "Surprise is a key part of this campaign. The idea is to take 'I'm Lovin' It' to new heights." Writing in AP Worldstream, Carpenter said, "Once packaged with music, video and other creative aspects, McDonald's executives promised that the new campaign will generate a 'wow' effect with consumers and restaurant operators. The intent, they said, is not only to attract more customers but to persuade them to come more often and to build brand loyalty."

OUTCOME

If success can be measured by awards, recognition, and increased sales, McDonald's "I'm Lovin' It" campaign hit the jackpot. In 2004 Advertising Age named the company Marketer of the Year for its achievements. In response to the award Jim Skinner, McDonald's new CEO, said, "I'm lovin' it! We're honored to be recognized with one of the most coveted awards in the advertising and marketing world."

McDonald's Light said that awareness of the "I'm Lovin' It" campaign reached 86 percent of consumers in the top 10 countries tagged by the company. The success of the campaign was "another sign that we're connecting with customers like never before," he said. Noting the international success of the campaign, the Scottish Daily Record & Sunday in Glasgow reported that "McDonald's advertising slogan 'I'm lovin' it' has been crowned king of the catchphrases. The fast-food giant's jingle is being repeated in 43 percent of workplaces, says a new survey."

NOT EVERYONE LOVED MCDONALD'S "I'M LOVIN' IT"

In markets where McDonald's had earned a reputation for bad service or where the stigma of junk food hung over the company's restaurants, its "I'm Lovin' It" campaign was not necessarily loved by consumers. According to Kate MacArthur, writing in Crain's Chicago Business, England was one of those markets. "To win over skeptical Britons," MacArthur said, McDonald's launched a new campaign with the theme "Changes": "The campaign replaces the famous Golden Arches logo with a yellow question mark and carries the line, 'McDonald's. But not as you know it.'" The new campaign, created by the London office of Leo Burnett, McDonald's Chicago-based agency, was designed to replace the negative image British consumers had of the fast-food giant. It was followed by a direct-mail campaign informing people of the chain's new healthful menu choices and smaller portions. Larry Light, McDonald's executive vice president and chief global marketing officer, told MacArthur that the "Changes" campaign was designed "to encourage people to think of us differently and make them aware of new products. There's no intention to abandon either the Arches or 'I'm lovin' it.'"

The Cincinnati Post wrote in November 2003, "The biggest single-month increase at its U.S. restaurants in more than five years lifted McDonald's Corp. to an impressive 8.4 percent gain in comparable sales last month … [The company] attributed the increased business in part to benefits of the first full month of its exhaustive new advertising campaign, featuring the tag line 'I'm lovin' it.'" In addition, the newspaper noted that sales in France, Germany, and Britain, the company's three biggest European markets, also showed increases over the previous year.

WE LOVE TO SEE YOU SMILE CAMPAIGN

OVERVIEW

McDonald's Corporation, with more than 26,000 restaurants serving 43 million customers every day in 2000, was the world's number one fast-food burger chain and also the best known. But despite its brand recognition and international reach, the nearly 50-year-old chain was struggling through an inexplicable sales slump that had industry experts scratching their heads and wondering what the problem was. In an effort to revive its image and boost sales, McDonald's upgraded its restaurants. The overhaul included upgrading the interiors, repainting the exteriors, introducing new menu items and a new food-cooking system, and dressing employees in trendy new uniforms.

To promote the reinvented McDonald's brand and drive consumers into the chain's restaurants, the company had advertising agency DDB Chicago develop a new marketing campaign. Themed "We Love to See You Smile," the $500 million campaign began in June 2000 with a series of eight television spots that emphasized how McDonald's fit into consumers' lives. The first spot featured the chain's famous spokescharacter, Ronald McDonald, interacting with people in various settings. Subsequent spots focused on people going about their lives, but with visits to McDonald's playing a role in their day-to-day activities. Other commercials emphasized different aspects of McDonald's restaurants, such as their drive-through windows or customer service.

Although there were high expectations for the new campaign, it failed to achieve its goals. One year after it began, sales at the chain's restaurants remained stagnant. Further, negative comments about the campaign included the Delaney Report deeming it "ineffective" and Advertising Age noting that it was irrelevant to consumers. In 2001 DDB modified the campaign and introduced a companion tagline, "Variety Is the Smile of Life," which ran along with the original "We Love to See You Smile." The campaign was revised again in 2002, and the tagline was shortened to "Smile." As the chain's sales slump continued, McDonald's charged its two key agencies, DDB Chicago and Leo Burnett, to develop a new campaign. In 2003 Leo Burnett's effort, "I'm Lovin' It," replaced DDB's "Smile" campaign.

HISTORICAL CONTEXT

Ray Kroc opened his first McDonald's restaurant in Des Plaines, Illinois, in 1955 and rang up just over $360 in sales the first day. From those beginnings McDonald's evolved into a chain of fast-food restaurants with a reputation for providing a family-friendly dining environment and for quickly serving a selection of good food. By 2000 the McDonald's chain had grown to become the number one fast-food burger chain, with 26,800 restaurants in 119 countries, serving some 43 million people each day. The chain's iconic spokescharacter, Ronald McDonald, was recognized by 96 percent of children, falling in second behind Santa Claus.

Despite the numbers and worldwide brand recognition, in 2000 McDonald's was suffering through another year of stagnant sales—both in the United States and its international markets—that had industry analysts asking what was going wrong. For July and August 2000 McDonald's reported that sales averages were up 1.5 percent, an increase that was attributable to the higher prices being charged for menu items. But the chain's overall sales transactions for that period were down 6 percent. The company cited a variety of reasons for its below-market sales performance, including currency fluctuations in foreign markets and unsuccessful marketing and advertising in the United States.

To reestablish its brand, to stand out in the over-saturated fast-food arena, and to win back its fleeing customers, McDonald's initiated a makeover of its restaurants. Included in the revamp was repainting the chain's restaurant exteriors in bright, eye-catching colors, upgrading restaurant interiors, installing a new cooking system, adding new menu items, and updating employee uniforms. To promote the changes and assure consumer awareness of the new McDonald's, the company replaced its nearly three-year-old advertising campaign and tagline, "Did Somebody Say McDonald's?" with a campaign created by its agency DDB Chicago. The new campaign, with the theme and tagline "We Love to See You Smile," was released in June 2000.

TARGET MARKET

When planning its campaign, McDonald's identified three specific target markets: mothers, young adults, and families with children. The campaign's goal was to reach each of these demographics and show them that when it was mealtime, McDonald's had a place in their lives. Also targeted by the campaign, with special television spots, were Hispanic and African-American consumers of all ages. Additionally, "We Love to See You Smile" was designed to reach what the company described as "veto-voters," women who did not typically eat at McDonald's and usually made the decisions about where their families would eat when they dined out. Always remembering that primary among its core customers were kids—preteens and teens—the campaign featured spots that would appeal to that age group as well.

COMPETITION

The number two burger chain, Burger King, was founded in 1954 with its first restaurant in Miami. By 2000 it had grown into a chain of more than 11,180 restaurants. But also by 2000 the company had fallen into a sales slump in the United States. Although Burger King reported that overall sales increased 5 percent in 2000, the growth was driven by its international business (which was up 2 percent in the United Kingdom, 8 percent in Spain, and 4 percent in Latin American). In North America sales were stagnant, up just one-tenth a percentage point. After several failed U.S. marketing campaigns—including "Going the Distance," which was released in 1999, and "Got the Urge?" which began in early 2000 and featured the voice of actress Kathleen Turner—the chain noted that it was time for a change. In a Knight Ridder/Tribune Business News report Burger King president Mikel Durham was quoted as saying that the company "didn't feel like the advertising was moving the needle enough. We're not confident that we're driving sales and getting across the key brand message."

To try and reverse its downward sales trend, Burger King put its $400 million advertising account up for review in 2000. Its creative agency at the time was Lowe Lintas & Partners (previously Ammirati & Puris). The agency had created the successful "It Just Tastes Better" campaign, which began in 1996 and ran through 1998. Following the review Burger King awarded McCann-Erickson its U.S. adult general advertising account. In early 2001 Burger King released a new national advertising campaign created by McCann-Erickson. Themed "The Whopper Says," the effort targeted burger lovers of all ages and included two television spots. It gave the chain's Whopper sandwich a personality that the company described in a press release as "entertaining, fun, and confident." Its new tagline was "In the land of burgers, Whopper is king."

In 2000 Wendy's International, founded in 1969 in Columbus, Ohio, was the number three fast-food burger chain with some 6,000 restaurants. While competing fast-food restaurants were reporting sales declines in 2000, Wendy's had the distinction of increasing sales. The chain reported same-store sales increases of 3 percent in its U.S. restaurants in November 2000. For 2001 the chain's same-store U.S. sales continued to increase, inching up a reported 1.6 percent. Helping drive the upward sales trend was the company's marketing program, created by ad agency Bates USA New York. For 11 years its advertising efforts featured Wendy's founder and chairman-CEO, Dave Thomas, and he had become one of the nation's most recognized corporate spokesmen. His affable approach to promoting his company's burgers and other menu items encouraged hungry, time-strapped consumers to stop in for a quick, tasty meal. Things took a sudden turn in 2002, when Thomas died of liver cancer. What followed was an effort described by the company as "Life after Dave," which included boosting the media budget 30 percent to about $308 million in an effort to keep the sales and earnings growth momentum going. Don Calhoon, Wendy's executive vice president of marketing, told Advertising Age that the chain stood out with consumers either with or without the presence of founder and spokesman Dave Thomas. He added that the chain's new advertising would have the "continuity, brand recognition, and emotional ties that Dave has brought us over these years. The perfect replacement for Dave is the Wendy's brand."

MARKETING STRATEGY

McDonald's moved into 2000 looking for a new marketing campaign and slogan to replace its nearly three-year-old theme and tagline, "Did Somebody Say McDonald's?" Although according to McDonald's executives the long-running campaign was a success, the chain's earnings and sales had been slipping for several years. The company hoped that a new marketing effort would boost its sagging sales numbers in the second half of 2000. A new campaign was also necessary to promote the changes that McDonald's had made to its restaurants over several years, from a new cooking system and new menu items to updated uniforms for employees and revamped restaurant interiors and exteriors. To help achieve the company's goals, ad agency DDB Chicago created the campaign and tagline "We Love to See You Smile." The campaign, with a reported $500 million budget, included radio spots and eight television commercials that began airing in June 2000. More than 80 different versions of the original spots were also planned to follow the initial ones.

MCDONALD'S FLASHY RETRO COLORS GET ATTENTION AND COMPLAINTS

In an effort to stand out in the crowd of fast-food chains cluttering the landscape, McDonald's returned to its roots with a new paint scheme for its restaurants. While McDonald's may have considered nostalgic the bright red, yellow, and white colors that began appearing on the exterior walls of the restaurants, some people considered the colors to be garish or tacky. Many communities that were more comfortable with the muted colors the chain had previously used on its buildings took a stand against the new paint. Planning and zoning officials in some smaller cities turned to their ordinances and refused to allow the chain to repaint the restaurants in the new colors. McDonald's restaurants located in the busy commercial areas of bigger cities met with few complaints about the new colors, however. McDonald's executives agreed that in some places the new color scheme may not have been appropriate and left the old colors in place. In a Crain's Chicago Business report a company spokesman was quoted as saying, "We want to make sure we're good neighbors wherever we are."

Each television spot portrayed the different ways that McDonald's connected with a variety of consumers in their daily lives. The kick-off spot was described by Advertising Age as a "slice-of-life commercial" that featured a dancing Ronald McDonald in a parade, then at an outdoor wedding, and finally with a construction crew (one burly member of which was about to enjoy a Happy Meal). The chain's mascot did not appear in subsequent spots, but each maintained the slice-of-life format. In one spot a doctor was shown leaving home to complete her morning rounds at a hospital. When she reached her car, she noticed a message from her children reminding her about breakfast: an M drawn in the condensation that had formed on the car window overnight. Another spot showed a mother and a father preparing to go out for the evening and discussing with their preteen kids which babysitter they should call. When the kids' preferred sitter arrived, she was still dressed in her McDonald's uniform. Other spots featured a McDonald's drive-through; in one, for instance, a teenage couple pulled into the drive-through and placed their order. The girl ordered a Big Mac without onions. Her date followed her lead, looking forward nervously to what not eating onions could mean. Another commercial showed a father sitting at a McDonald's drive-up window in his car while taking dinner orders from his kids on a cell phone. A spot developed for the Hispanic market emphasized the chain's service by following a customer from the time he entered the restaurant until his order was delivered to his table by a McDonald's staffer. Throughout the spot everyone was smiling, emphasizing the "We Love to See You Smile" tagline.

OUTCOME

The 2000 introduction of the much-anticipated "We Love to See You Smile" McDonald's campaign did little to help restore momentum to the chain's earnings. The campaign also only boosted sales slightly. According McDonald's, in the year following the campaign's launch, third-quarter earnings dropped 1 percent, while sales increased just 3 percent. The chain also noted that sales and earnings were expected to remain flat through the end of 2001. "We Love to See You Smile" also led to negative comments from industry insiders as well as from some McDonald's officials and franchisees. The Delaney Report, an ad-industry newsletter, described the campaign as "ineffective," while an unidentified McDonald's source stated that the chain's advertising was "a sad situation." Kate MacArthur of Advertising Age reported in 2000 that responses to the television spots by some of the chain's franchisees were "lukewarm"; in a 2002 article she pointed out that many observers had criticized the campaign, along with past efforts, for being "too milquetoast and conservative to be relevant to contemporary consumers."

In 2001 DDB revamped the McDonald's campaign to help promote additional changes to the chain's menu and again attempt to drive sales. Included in the effort were three new television spots. The spots concluded with two taglines: "Variety Is the Smile of Life" was followed by the original "We Love to See You Smile." Another makeover followed in 2002 with 13 new spots that had an edgier tone and a shortened tagline, "Smile." Despite the revised marketing efforts, by 2003 the chain was still struggling to boost sales and earnings. McDonald's began testing different advertising approaches created by its two key agencies: DDB, which had developed the "We Love to See You Smile" and "Smile" campaigns, and Leo Burnett USA. Later that year the campaign developed by Leo Burnett, "I'm Lovin' It," replaced the "Smile" campaign.