Is McDonald's Kid-Themed Business Model Obsolete?
A few weeks ago, USA Today announced: "Taco Bell will shock the fast-food industry on Tuesday by announcing plans to drop kids meals and toys at all of its U.S. restaurants.” CEO Greg Creed told the paper: “The future of Taco Bell is not about kids meals. This is about positioning the brand for Millennials."
Some were skeptical about the announcement, given that kids' meals only represent half of one percent of Taco Bell's overall sales. While increasing pressure on the fast food industry to stop marketing to children wasn't the main reason for the change, it's still a significant development.
That a large fast food company thought it could gain a public relations boost by showing off what amounted to a failed business strategy is a sure sign of success by children’s health advocates. Restaurant executives have heard the message loud and clear: Marketing junk food to children is a scourge on their industry and any move that distances your company from such negative PR is a good thing.
The move also leaves McDonald’s increasingly isolated in its steadfast refusal to change its ways. Taco Bell is not in fact the first or only company to abandon children as a target market. In 2011, Jack in the Box announced it was pulling toys from its kids’ meals, explaining to Reuters: "Our advertising and promotions have focused exclusively on the frequent fast-food customer, not children."
And this recent article from NBC News describes how, as fast food “grows up,” more chains are retiring old-fashioned, child-oriented mascots and themes for a more modern marketing approach. The article cites childhood obesity concerns as playing “a significant role” in this decision making. Also, mascots such as Ronald McDonald just don’t fit the modern world, particularly as more upscale food chains gain popularity. The article explains:
Analysts say it is part of a broader trend of fast food chains abandoning the mascots that once defined them. As they embrace a healthier, more upscale image, cartoons and kitsch don’t have the selling power they once did.
It seems that McDonald's has not quite gotten this memo, remaining committed to its kid-marketing practices and allegiance to its mascot Ronald McDonald, despite signs that the fast food leader may be losing its relevance.
McDonald's Millennial Problem
In recent months, top business publications have been pointing to the fast food leader’s “millennial problem.” For example, Ad Age recently found that McDonald’s didn’t even rank among the top ten brands for this critical demographic. How critical? According to an internal memo uncovered by Ad Age, McDonald’s defines millennial as those between ages 18 and 32, while others estimate their numbers to range from an incredible 59 to 80 million.
McDonald's solution to their millennial problem: The new McWrap sandwich. (Burgers are losing popularity among young adults.) According to Ad Age, an internal McDonald’s memo says the McWrap "affords us the platform for customization and variety that our millennial customer is expecting of us."
In a recent in-depth analysis of the McWrap, Business Week explained the new menu item as “a salvo in the Fresh Wars: a high-profile attempt to get the attention of customers who have turned to fresher, seemingly healthier offerings from competitors such as Five Guys, Chipotle, and Subway.”
Notice anything important about those three examples cited? None of them market to children. In other words, McDonald’s has no choice but to compete on an adult playing field, to consumers who are less interested in toys and clowns and more interested in fresh and higher-quality ingredients. But will it be enough?
So far, it doesn’t seem the McWrap will solve McDonald’s millennial problem. According to Business Week, the company is staying mum on sales figures. (The product launched in April.) According to one industry analyst, this probably means the news isn’t good enough to share.
So McDonald’s may have to go back to the drawing board and look for other ways to change its business model. Here are two suggestions that might help bring McDonald’s into the modern age and gain broader appeal.
Retire Ronald: As this campaign from Corporate Accountability International explains, it’s high time to put this mascot out to pasture. He has done enough damage to kids’ health, luring them into a lifetime of bad eating habits. As the article noted above explains, mascots are so 1970. Plus, he’s just plain creepy.
No More Toys: If other fast food chains can figure out how to be successful without adding made-in-China pieces of plastic to their meals, then so can the industry leader. It would also mean not having to defend against lawsuits like the one filed against McDonald's in 2010. (The case was later dismissed.)
Lose a PR Problem, Gain Business
McDonald's knows it has a massive public relations headache on its hands when it comes to marketing to children. At their recent annual shareholder’s meeting, almost every single question aimed at CEO Don Thompson was about marketing to children and public health. Instead of taking responsibility and promising to make changes, the CEO unconvincingly denied such targeted marketing practices. He also feebly defended Ronald, saying he is “just a clown.”
With this position, McDonald’s continues to risk not only the continued criticism from children’s advocates and health professionals, but possibly even its own bottom line. Why not join the competition and benefit from the positive PR glow that comes with no longer targeting children, while appealing to more adults in the process? Seems like win-win: shed critics, gain customers.
This doesn’t mean McDonald’s has to abandon families in its business model altogether; it just has to change its messaging and marketing tactics. Taco Bell’s CEO Greg Creed told USA Today that many parents will be happy to no longer be nagged by their kids to eat at Taco Bell just because of a toy. "It's not that we don't like kids," he said. "We're empowering parents." Well said.
It’s time for McDonald’s to finally move into the 21st century and stop clowning around.
Michele Simon is a public health lawyer, author of Appetite for Profit, and advisor to Corporate Accountability International.