This report will assess the degree to which the organization of McDonald’s is customer centred. Established in 1955 as a small Illinois neighbourhood restaurant, McDonalds has developed rapidly in becoming one of the world’s best known brands of fast food with over “30,000 restaurants in over 120 countries and with 2001 sales in excess of $40 billion the company claims to be the world’s largest food service organisation” (Jones et al,2002). The McDonald’s brand continues to enhance its worldwide reputation to this day, the main reason behind this continual success is because the organization listens to its customer’s needs and expectations. It is imperative that McDonalds remain customer focussed due to the vast amount of competition in the fast food sector, “customer orientation is critical to business profitability (Donaldson,1993; Narver and Slater,1990) and is “a necessary antecedent of competitive advantage” (Ganesan,1994; Williamson,1991).
The typical McDonald’s customer cannot be stereotyped or defined. In an attempt to categorize the typical McDonald’s customer market research has been carried out which identifies different types of customers, for example (www.mcdonalds.com):
- A parent with two children – Visits the restaurant to give children a treat.
- Children – View McDonalds as a fun place to eat.
- A Business Customer – Visits during the daytime as service is fast, the food is good quality and can be eaten whilst on the move.
- Teenagers – Attracted by the Saver Menu and the affordable food, Wi-Fi internet access is also an attraction.
This report will attempt to assess specific parameters of focus for consideration with regard to customer centrality. The literature review will discuss several marketing concepts and models with the key concept being the 7 Ps Marketing Mix, by investigating how the 7 Ps model is integral to customer centrality various other concepts will arise as part of the marketing mix model.
“An organization which realizes that profits come from customers, not from products, will establish systems to measure and manage customer profitability” (Marketing Management,2003).
In order to appreciate and understand how customer relationships are critical for profitable organisations we need to understand the key fundamental marketing principles. Once these key principles have been discussed the author will discuss how these fundamental principles are applied within the organization of McDonalds.
The Marketing Mix Concept
A “consumer-centred organisation is focussed upon and structured around, identifying and satisfying the demands of its customers” (Marketing-Management,2009). The marketing mix management paradigm has dominated marketing thought, research and practice since it was introduced almost 40 years ago (Gronroos,1994). The marketing mix comprises four levers, by utilising the mix an organization can position themselves or their products in a way that makes them attractive to target consumers. Kotler and Keller (2006) define an organisations marketing mix as ‘a set of tools that work together to affect the marketplace’. Today’s marketing emphasis is on that of customer relations due to the competitiveness of the economy
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McCarthy (1964) developed the early marketing mix models and formulated the 4Ps concept consisting of product, price, promotion and place. Since its conception the 4Ps ‘became treated as the unchallenged basic model of marketing’ (Gronroos,1994) resulting in most other models and approaches being overlooked and discounted in preference of this model. Traditionally the marketing mix has consisted of the 4 Ps however Gronroos (2000) points out that
“during the last two decades marketing researchers have increasingly found that the list of 4 Ps is too restrictive and more…variables have been suggested…such as people, processes and physical evidence”.
The 4Ps framework is thought to be most relevant for introductory marketing and consumer marketing as opposed to services marketing (Rafiq et al,1995).
Gronroos (1994) argues that
“a list of categories of marketing variables…can never be considered a very one….A list never includes all relevant elements, it does not fit every situation and becomes obsolete”.
Crittenden (2007) backs up this statement with her view that ‘relying upon the tactical aspects of the marketing mix (4Ps) is insufficient for long -term success’ . Gronroos (1994) argues that the ‘four Ps constitute a production-orientated definition of marketing, and not a market-orientated or customer-orientated one’. Swartz et al (1973) adds validity to this statement in observing that some experts feel that public relations should be recognized as a distinctive marketing mix variable. Gronroos (1999) also argues that customer relations should form part of the marketing mix concept ‘ the marketing mix approach does not cover all resources and activities that appear in the customer relationships…of the customer relationship life cycle’, he states that the 4Ps are ‘far too simplistic’. Crittenden (2007) argues this point in saying ‘the successful simplicity of the 4P framework has allowed it to remain strong as an organizing method’. The 4 Ps concept is perceived as too restrictive, as it is centred more towards short term transactions rather, the concepts failure is that it does not concentrate on the importance of building and maintaining long term relationships with customers (Marketing Management,2003). In order to achieve customer centrality within the “marketing mix” concept Booms and Bitner (1981) proposed that the existing four elements of the marketing mix be extended to include three additional elements: physical evidence, people and processes. This revised marketing mix model is known as the 7 Ps with the concept used mostly within service industries and knowledge intensive environments. McDonalds uses the marketing mix concept with regards to customer centrality by utilising the framework in the manner;
This area covers all aspects with regards to creation, development and management of products (Brassington & Pettitt,2003). Some are physical products; others intangible personal services, the product can include non-core items such as packaging and after-sales service. A huge amount of choice is available on the McDonalds menu, McDonalds places ‘considerable emphasis on developing a menu which customers want’ (McDonalds,2009). McDonalds’ product popularity is supported by the following customer statement;
“you can always rely on them to get it right”…”for convenience they cannot really be beaten” (Jones et al,2002).
Price represents on a unit base what the company receives for the product or service which is being marketed (Jobber,2001). The price of a product or service may portray it being a quality item or a desirable one (Brassington & Pettitt, 2003). A customer statement with regards to the price at McDonalds;
“it is a real treat for the family and is very good value”…”good cheap food…fits the student lifestyle” (Jones et al,2002)
McDonalds state that ‘the danger of using low price as a marketing tool is that the customer may feel that a low price is indicative of compromised quality’. McDonalds acknowledge that they are in a competitive market but realise they are market leaders benchmarking product quality against price.
Promotion is concerned with how the product of service is made available to its target audience (Jobber,2001). McDonalds promotes its products and brand to customers through numerous methods such as sales promotions, direct mail, exhibitions, seminars, loyalty schemes, demonstrations and telemarketing. The ‘McDeals’ in-store consumer communication and loyalty program provides customers with ‘personal, customised purchase incentives, offers and sweepstakes at the point-of-sale’ (www.mcdonalds.com). With regards to customer centrality, promotion needs to be based on consumer-perception through use of the media to reach the target audience. McDonalds recently launched m-Venue which allows customers to access in-store digital content such as music, music videos and movie previews with their mobile phones or laptops whilst enjoying their food – this service is of no cost to the customer (www.akoo.com). McDonalds customers are also given the chance to win various prizes ranging from food vouchers to cash and sports cars via in-store game-based promotions (www.mcdonalds.com).
Place is concerned with distribution channels and consumer service levels (Baker, 1999). ‘Place’ refers to decisions about the ways in which products can be most effectively distributed to the final consumer, either directly or through intermediaries. Customers can interact with McDonalds on their website which can be used as an effective data gathering tool for relationship marketing. McDonalds restaurants are strategically placed in convenient locations, in retail outlets, motorway services and busy city/town centres – the aforementioned locations are either associated with leisure or relaxation activities. By strategically placing their restaurants McDonalds position themselves within the required target market.
Although many marketers agree that the 4 Ps model is limited in its application, some marketers still recognise the concept as ‘the holy quadruple…of the marketing faith…written in tablets of stone’ (Kent,1986). Crittenden (2007) argues that the ‘marketing machine must rigorously reflect the 4 Cs axiom of marketing (customer centrality, competitive capabilities, company collaborations, cyclical connections). Crittenden (2007) states that the 4 Cs must be used ‘in conjunction with the tactical components of the 4 Ps of the marketing mix, the 4 Cs are referred to as the ‘strategic components’. Crittenden argues that ‘marketing as a truly integrated function must use its 4 Ps as necessary components’, this statements conflicts with that of Gronroos (1999) who says that the 7 Ps concept should be viewed separately, with relationship marketing ‘suggested as one new paradigm’ . Crittenden (2007) states that ‘marketers would be wise to give attention to the 4 Cs of marketing and harmonize the Ps and Cs for a stronger, more powerful marketing machine’ it could be argued that in doing this the strategic Cs would effectively cover the relationship marketing aspect of the marketing mix. Interestingly the 4 C axiom states ‘customer centrality’ as an element, Crittenden (2007) states that ‘the customer is touted as the predominant theme of the marketing concept…the satisfaction of customers’ wants and needs is a major force in the world of marketing’ she goes on to say that the customer ‘must be central to the company’s focus, as their satisfaction is crucial to company success’.
McDonalds’ chief operating officer, Charlie Bell, supports the core concepts of the marketing mix framework in the following statement;
“To achieve our four business objectives – attracting more customers, increasing frequency, building brand loyalty, and increasing productivity – we will concentrate on the five drivers of superior customers experiences: people, products, place, price, and promotion.” (www.mcdonalds.com)
Marketing orientation is critical for today’s organizations, adopting a marketing function forms part of an organizations process but being market orientated is critical, Ottesen et al (2002). Gronroos (1994) states that along within the development of market orientation an organization needs to develop ‘true market orientation and a real appreciation for the needs and desires of the customers. Within many organizations the ‘marketing department’, and ‘organization unit’ is separate from the rest of the organization, the department is critical to ‘taking care of the fulfilment of customer needs and desires’ (Gronroos,1994). Gronroos (1994) says that ‘the psychological effect on the rest of the organization of a separate marketing department is, in the long run, often devastating to the development of a customer orientation or market orientation in a firm’. Gronroos (1994) states that ‘marketing specialists organized in a marketing department may get alienated from the customers’ with no interaction between customer and marketing specialist the customer become mere numbers with a lack of qualitative data an organization will suffer. Moller (1992) emphasises the aforementioned Gronroos point by stating
“from the functional view of marketing ‘mix’ management our focus has extended to the strategic role of marketing, aspects of service marketing, political dimensions of channel management, interactions in industrial networks; to mention just a few trends”.
Crittenden (2005) supports the strategic marketing concept by stating ‘if firms are truly to become market-orientated, the marketing function itself must become more strategic in its orientation’. Michaels (1982) stressed that ‘No-one person, system, or technique will make a company marketing orientated’ whist also pointing out that a marketing orientation cannot be achieved overnight. Kotler and Keller (2006) also stress the importance of structuring the organization to focus on the customer by management educating themselves and their staff about their marketing focus to show how it will support long-lasting success in the marketplace. McDonalds ‘takes a commitment to continuous training, from counter staff level, right through to senior executives’ (Tomkins, 1995). This rule applies to all levels and functions within an organization who must share a common commitment if they are to work together in the interest of the consumers. Kotler and Keller (2006) highlight the point that without the support of top management, the focus on customer satisfaction advocated by the marketing orientation will not become the guiding orientation for organisational decisions. Gronroos (1994) highlights the fact that most organizations the non-marketing specialists outnumber the marketing specialists, in order to achieve ‘true market orientation’ the non-specialist or ‘part-time marketer’ (Gummesson,1990) within an organization is critical as the ‘part-time marketer’ interacts with the customer more frequently than that of the full-time marketer (specialist). Gummesson, (1990) states that the full-time marketers ‘are not able to handle more than a limited portion of the marketing as its staff cannot be at the right place at the right time with the right customer contacts’ thus placing the customer interaction emphasis on the part-time marketer. ‘Internal marketing is considered a prerequisite for successful external marketing’ (Compton et al,1987), if the internal market of employees are not ‘successfully taken care of..the success of the organizations operations on its ultimate , external markets will be jeopardised’ (Gronroos,1990).
Gronroos introduced the ‘perceived service quality concept’ in 1982, this new concept introduced the ‘interactive marketing function’. This function was brought in to ‘cover the marketing impact on the customer during the consumption of usage process, where the consumer of a service typically interacts with the systems, physical resources and employees of the service provider’ (Gronroos,1994).
‘The interactive marketing function recognizes that every component – human as well as other – in producing a service, every production resource used and every stage in the service production and delivery process, should be the concern of marketing as well, and not considered operations or personnel problems only’ (Gronroos,1990).
Once Gronroos had introduced this system the servuction concept was developed which ‘pioneered the field’ of services marketing (Eiglier and Langeard,1987)) of services marketing. Servuction is the ‘process of producing services’ and is essential to any organization operating in the services segment and deals with, to great ‘extent the employees and the inner organization’ (Eiglier and Langeard,1987). With respect to McDonalds’ service quality Ken Tomkins (1995) states ‘the quality will be consistent, the service fast and friendly, the cleanliness exemplary, and the value second to none’. Part-time marketers are key to the servuction concept with an organization as ‘the impact of the ‘part-time marketers’ as well as the customer orientation of systems, technology and physical resources is paramount to the success of interactive marketing’ (Gronroos,1990). ‘The marketing success of a firm is only partly determined by the “full-time marketers”…the “part-time marketers” of a service provider may often have a much more important impact on the future purchasing decisions of a customer’ (Gronroos,1994). If a company was to abide by the principles set within the 4 Ps concept there would be ‘no personalized relationship with the producer and marketer of a product’ due to the ‘clinical approach, which makes the seller the active part and the consumer passive’ (Gronroos,1994)
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There are numerous other key issues within relationship marketing, with two vital concepts which should not be ignored, these are the promise concept and trust concept (belief is a direct resultant of trust). Calonius (1988) emphasizes that ‘the responsibilities of marketing do not only, or predominantly, include giving promises and thus persuading customers as passive counterparts on the market to act in a given way’. If an organization makes a promise to its customer and does not fulfil the promise ‘the evolving relationship cannot be maintained and enhanced’ (Calonius,1988). Trust, ‘a willingness to rely on an exchange partner in whom one has confidence’ (Moorman et al,1993). From this definition it can be seen that there has to be belief in the organizations trustworthiness ‘that results from the expertise, reliability or intentionality’ of an organization’ (Gronroos,1994).
The concept of relationship marketing as opposed to transaction marketing was introduced by Berry (1983) who observes that ‘clearly, marketing to protect the customer base is becoming exceedingly important to a variety of service industries’. Gronroos (1990) formulates a relationship definition of marketing which states
“Marketing to establish, maintain, enhance and commercialize customer relationships (often but not necessarily always long term relationships) so that the objectives of the parties involved are met. This is done by mutual exchange and fulfilment promises”.
Transaction-type strategy’s are usually facilitated in an organization pursuing a traditional marketing mix approach, whereas an organization applying a relationship marketing approach will focus specifically on the additional 3 Ps of people, physical evidence and processes which in turn will use the servuction concept to ascertain customer expectations and needs. An organization pursuing a relationship strategy has ‘created more value for its customers than that which is provided by the core product alone’ (Gronroos,1994). As customer interaction is enhanced through relationship marketing the customer recognises this added value, Gronroos (1994) states ‘relationship marketing makes customers less price sensitive’. Philip Lempert (www.supermarketguru.com) supports Gronroos’ statement
“People understand they get what they pay for, and as long as the food is good and it’s a comfortable atmosphere, they’re willing to pay repeatedly for it”.
Marketing trend analysts suggest that slashing prices to attract the customer isn’t always the answer, it will aid retention of existing customers but may deter new custom due to perceived quality (www.SupermarketGuru.com).
It is evident through this report that McDonalds as an organization is extremely customer focussed. By carrying out research within the marketing mix concept it can be seen that all of the 7Ps and associated models are utilised by McDonalds. Through use of the servuction concept McDonalds has succeeded in establishing a highly trained internal and external workforce which has resulted in high levels of customer service ultimately resulting in consistently high sales and customer retention and acquisition. The literature review further emphasises the fact that McDonalds have carried out extensive research within its market area by implementing a successful market segmentation strategy to satisfy the different customer needs and expectations within the marketplace. McDonalds’ service marketing strategy is testament to the additional three Ps of the marketing mix. Success of the overall service within the organization is due to the fact that the organization has critically identified all areas within the fundamental four Ps approach and emphatically succeeded in fulfilling all requirements with regards to segmenting, targeting, positioning and establishing an organizations which is customer central.
The success of McDonalds customer centrality is not achieved by default, the organization has differentiated itself within a competitive market by excelling in customer relations. There are several fast food retailers within the sector who have a customer base achieved by default but it is not evident to the marketplace that they have focussed on customer centrality as a priority which is in vast contrast to the philosophy of McDonalds which structures its organization around the demands of the customer. The following statement typifies the way in which McDonalds views its organization;
“We strive to be a progressive market leader and we can only stay ahead of the rest by listening to the most important ambassadors of our brand – our customers!” (www.mcdonalds.com).
The philosophy of customer centrality is imperative to service organisations as long as the relationship marketing concept is integrated within a successful marketing mix approach. Product orientated organisations could benefit from focussing on customer centrality by adopting relationship marketing. Transactional based marketing should not be viewed separately in its application as integration of relationship marketing within a transactional based model could result in increase in perceived quality, customer retention and overall satisfaction.
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