McDonald's is one of the largest fast-food chains in the world serving in over 100 countries. Under the leadership of new CEO Steve Easterbrook (1 March 2015 –), McDonald's has been making different efforts and undergoing changes after facing its worst financial years in a decade under the lead of former CEO Don Thompson. “Why McDonald's Is Switching to Fresh Beef” is the article and concept introduced to meet its customer demands which lead to this discussion paper with customer orientation as the main marketing concept. In this paper, how being customer-oriented is crucial to McDonald's; the benefits and challenges of changing to fresh beef; and the impact of the rollout on business performance will be discussed.
Goad and Jaramillo referred customer orientation as a central construct in the marketing and sales literature. Customer orientation is a management and sales approach in which the customer is at the center and the business departments work around their needs and demands (Customer Orientation, n.d.). As mentioned in the article, McDonald's desire to serve more quality-conscious customers has led to the decision to provide healthier meal options, such as the use of fresh beef instead of frozen beef in their burger. Changing to fresh beef may be beneficial to McDonald's in these ways:
i. meeting customers' changing taste and trends;
“All things to all customers” (cited from the article). A survey revealed that more younger consumers are far more concerned about everything from food ingredients, genetically modified food to organic foods than previous generations and is willing to spend more money for healthier products (Watson, 2015). According to another survey, burger placed fourth in the top five meals among the 16 to 20-year-olds. The world largest burger chain switching to fresh beef is part of its initiative to meet the needs of customers who seek for a healthier option in fast food restaurants.
ii. increasing speed;
Fresh beef cooks faster than frozen beef. In this case, the meal preparation time is reduced which results in shorter customers' waiting time (the reason why customers visit a “fast” food restaurant). At the same time, McDonald's get to serve more customers, killing two birds with one stone.
The ability of an organisation to sufficiently understand their customers, learn from the market and be able to generate superior customer value is crucial for attaining sustainable competitive advantage (Guenzi & Troilo, 2006; Hult, 2011; Narver & Slater,1990). Therefore, another advantage of McDonald's offering fresh beef is that it can help to overcome competition. McDonald's acknowledged that it lost 500 million customer transactions in the U.S. since 2012 and the upside was that the majority of those customer visits were lost to other major fast-food chains, rather than to newer rivals (Choi, 2017). Wendy's, one of McDonald's major competitor released a brutal ad campaign that stated “The iceberg that sank the Titanic was frozen, too” took a shot at McDonald's frozen beef. Therefore, the change to fresh beef is needed to remain competitive in the fast food industry.
However, it may be difficult for McDonald's and its franchisees to make burgers with fresh beef as learned in the process of testing the fresh beef burgers. The challenges include:
keeping the patties fresh as the patties have to be cooked-to-order and should not sit for more than five minutes, as opposed to batch cooking of frozen patties that can sit up to about 15 minutes in a warmer; calculation headache due to the toasters that cook the hamburger buns faster than the cook time for a fresh beef patty; and last but not least, during the high-traffic periods of the day at the drive-through, which accounts for 70 percent of McDonald's US sales, makes cooking burgers to order a tough ask for restaurant workers (Purday, 2017).
The fresh beef will be available at the chain's U.S stores but Alaska and Hawaii are not included in this rollout. Furthermore, McDonald's will still use frozen beef in its other burgers, specifically its flagship Big Mac, as well as regular hamburgers and cheeseburgers, fresh beef will only be available in Quarter Pounders, Quarter Pounders with cheese, Double Quarter Pounders and the signature line-up (Maynard, 2018), making the availability of fresh beef somewhat limited. Additionally, the project has required changes by kitchen crews and supplier have invested about $60 million updating their supply chain (Naidu & Baertlein, 2018).
Nevertheless, after the test of fresh beef in more than 400 restaurants in Texas and Oklahoma, the company said it received a 90 percent satisfaction rating from customers as well as a 90 percent intent to repurchase rate (Whitten, 2018) which suggested that this rollout will positively impact the sales of the company and thus led to the decision to use fresh beef instead of frozen beef. Moreover, the price of the burger remains even though the quality and freshness of the meat are greatly increased.
Fresh beef may not only be limited to the Quarter Pounders as “We'll follow what the customer tells us in terms of the response," said Kempczinski, president, McDonald's USA, in an interview (Wohl, 2018). This statement from the president proved that McDonald's is very customer oriented as customer orientation means recognizing the critical importance of customers and doing everything possible to retain their business (Wolfe, 1999). If the response to the fresh beef is good, McDonald's might be using fresh beef in the other burgers as well. The 90 percent satisfaction rating from customers and 90 percent intent to repurchase rate may be considered as customer's loyalty whereas customer's loyalty has been defined as a repetition of customer's visiting and meeting or repetition of purchase behaviour, while it includes emotional commitment or expresses a favourable attitude towards the service (Jung and Yoon, 2013).
In conclusion, the healthy switch to fresh beef is thought to be a smart move for McDonald's in increasing the sales by focusing on the needs of their customers. Being customer-oriented benefits McDonald's as customers' needs are satisfied, resulting in customer loyalty. The fresh beef rollout may be challenging in some aspects but the benefits overweigh the challenges. In reference to the table in the article, McDonald's may be the only one in the top five that uses frozen beef, but if McDonald's offer fresh beef in most of its product, it is believed that McDonald's could rise to the first place on the list.
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