What gives? Wouldn’t you think this would be the worst possible time to for McDonald’s to launch more expensive Angus burgers? Will premium products of any sort sell in this tight economy? Obviously, McDonald’s is betting these will.
After years of testing its premium Angus burgers in 1000 of its restaurants in a cross section of cities including: Columbus, Ohio; New York, Los Angeles and Albuquerque, New Mexico, McDonald’s is about to go national: The company plans on selling its new burgers in all of its U.S. locations for the next few months, at the very least. Possibly longer.
This according to the Associated Press, and dutifully reported by the nation’s newspapers, including the Chicago Sun Times.
At $4.00 a pop for Angus burgers at McDonald’s and a third of a pound of beef at that, with all the usual fixings and condiments you’d expect. . .debuting in a soft economy. Debuting while the fast food giant is still pushing its value meals. Hmmmm. . . .Interesting and noteworthy from a marketing perspective.
According to the Sun Times: “Despite the continuing recession, spokeswoman Danya Proud said the time is right to launch the ‘bigger, premium’ burger nationwide.
“Customers are looking for great tasting burgers at a value that only McDonald’s can offer,” she said. “These premium burgers are a tremendous value compared to similar fast-casual and midscale offers.”
This realization puts the whole McD’s decision into focus, doesn’t it? Let’s look at the facts:
* Fast-casual chains sell their premium burgers for a whole lot more than $4, generally for $8 or more. That’s value–down economy, or not.
* Might McD’s take some of the premium burger business away from TGI Friday’s, Chili’s Grill & Bar, Five Guys, etc?
* McDonald’s has thousands of retail sites and immediate distribution for its new Angus burgers.
* McDonald’s associates can offer the new Angus burgers to its customers and potentially trade many of them up from the lower-priced burgers on its menu to its pricier–but higher quality, favorful new offering.
* Four bucks is still a great deal for better beef–might this be a small luxury consumers will afford themselves as they refuse to pony up a significant amount of cash for pricier luxuries?
Questions:
* Would you be willing to try a larger, premium Angus burger at McDonald’s? Do you think $4.00 represents value for this sandwich?
* Do you think Angus beef or not, 1/3 of a pound is just too much red meat, fat, etc to be healthy except on occasion?
* Do you think McD’s will be successful in competing with other fast-casual restaurants offering premium burgers?
* Do you think they can take some business away from these other establishments?
* What do you think of McDonald’s timing in the launch of the new Angus burgers? Is it folly–or sheer brilliance–to offer a pricier sandwich in a tough economy?
I’d love to hear from you.
I think it’s a smart move. In a down economy, people look for inexpensive ways to have a “luxury” or premium experience. I cant’ imagine better timing for McDonald’s.
“I cant’ imagine better timing for McDonald’s.” Agreed, Jonathan. As you said, it’s premium quality at a value price. We Americans love our hamburgers and what better time to offer Angus beef for less money than other casual restaurants?
Thanks for weighing in with your vote on this, Jonathan. I appreciate your insight.
I think it’s a great move on McDonald’s part, and perfect timing, since more people are traveling on vacations.
We seldom stop at fast food restaurants except when we’re on the road, and knowing that we can get something of better quality will definitely influence our decision, especially when there are a limited number of choices (on a toll road for example).
As is often the case, McDonald’s is launching a product perfect for both the economy and their newest customer demographic–people who primarily ate out at upscale restaurants, now eating instead fast and less expensive food but still looking for something exotic (special) on the menu.
I love angus burgers and have been eating them for six years. However, I seldom stop at McDonald’s and don’t see that changing, as we have cut dining out almost entirely, except at my client’s restaurants.
Good point, Teeg. I’ll bet many who wouldn’t normally stop into McDonald’s might now that they can purchase a better quality burger for less money than they’d expect to pay in another casual eatery. Exactly.
It seems that with McD’s recent foray into coffee and lattes, and now premium quality beef, they’re angling for new customers. . .you know, consumers who didn’t regularly buy food and beverages in their stores with regularity.
Thanks for weighing in, Teeg. I think you’ve made an important point here.
There’s been a lot of talk about consumers dialing down luxuries in tough economic times. So instead of taking that seven day cruise they may decide instead to just take a few days off from work to enjoy themselves, eating at some upscale restaurants and relaxing by the community pool.
In this scenario consumers are looking for ways to pamper themselves with less expensive luxuries. My question is, does a premium burger at McDonalds really fit the bill? If I want to treat myself to something, why not just take it up one notch higher at TGI Friday’s or Chili’s?
Another obstacle I see McDonald’s facing is overcoming the common perception. They are known for cheap, fast food. It will take time for consumers to make a connection with McDonald’s and a premium sandwich. If I have a craving for a premium beef sandwich, (or any higher quality food item) McDonalds wouldn’t be top of mind. That’s not to say there won’t be the possibility for upgrading my order once I’m already at McDonalds.
Thoughts?
Thanks, Lewis. Couldn’t have stated this better than you just did: “As is often the case, McDonald’s is launching a product perfect for both the economy and their newest customer demographic–people who primarily ate out at upscale restaurants, now eating instead fast and less expensive food but still looking for something exotic (special) on the menu.”
I think you’re right. Consumers have cut down on eating out, and then cut down on eating out as expensively when they do go out. This move on McDonald’s part will appeal to many people.
P.S. It’s nice that your clients appreciate your excellent work and treat you to business lunches and dinners, even in this economy. Good for you, Lewis.
Chris,
You’re an excellent devil’s advocate. Love your comments.
“My question is, does a premium burger at McDonalds really fit the bill?” For some consumers, I think it does. For others, the nicer ambiance at Chili’s or TGI Fridays might be worth paying three or four bucks more for that Angus burger.
Perception is always a factor when an operation known for cheap, fast food and low prices trades up. Having said that, I think McD’s has been on this path for a while now. Think of the coffee drinks they’re offering now, for example. As you succinctly stated, for some customers, McDonald’s will not be top of mind if they want to eat a premium burger. Or buy a latte. But for many others, I’m betting the value proposition will win them over. Other DF readers will see this differently. Every opinion is encouraged and welcome. What say you, DF readers?
Thanks, Chris. Your insights are excellent.
Makes sense. People at all levels are trading down.
Hi Jon,
“People at all levels are trading down.” True on the face of it. But, are people trading down vis-a-vis price or quality? See, I think people are now insisting on more value for their money than they did before the economic meltdown last September. I don’t think they want to trade down on quality at all. That’s why this move on McD’s part is very smart. Offering more quality for less money than their competitors for premium beef is a great strategy, in my view.
Thanks for commenting, Jon.
I think it is a good move in terms of targeting customers who are cutting back on spending and still want premium food. However, it goes a bit contrary to their new “healthy green” image they have tried to establish with their salads and healthier menu.
Though i disagree with Jon because I really dont associate McDonalds with “luxury” and people would be skeptical in accepting that the angus beef is of good quality etc if it is being offered so cheap
I think it is a good move in terms of targeting customers who are cutting back on spending and still want premium food. However, it goes a bit contrary to their new “healthy green” image they have tried to establish with their salads and healthier menu.
Though i disagree with Jon because I really dont associate McDonalds with “luxury” and people would be skeptical in accepting that the angus beef is of good quality etc if it is being offered so cheap
Hi Perzen,
Thank you for sharing your observations with us. Speaking for myself, I do not associate McDonald’s with healthier food choices for the most part. The chain has been in the business of offering burgers and fries from its first store on. Even its salads sometimes come with calorie-laden salad dressings.
As to the quality to price ratio, it’s likely that McDonald’s is offering a fairly good quality of beef. I believe they can price their premium burgers lower due to the huge volume of meat they purchase, their large sales volume and their pricing structure, Perzen. And that makes them very competitive with casual restaurants that offer more ambiance.
Thank you for weighing in. I appreciate it.
I see nothing wrong with McDonald`s stepping it up a little. People are still spending money like it`s Christmas!
Hi David,
Actually due to the current recession, consumer spending is way down. Many are focusing on reducing debt and saving money again. And when consumers do spend, they’re interested in getting the most value they can for their money. That’s one of the reasons why I think Angus beef offerings at McDonald’s ought to do well.
Thanks for adding your thought to my post, David. I appreciate it.
I try to give my five cents from a European perspective:
a) McDonald’s offer is unrespectful of any of the arising question about the impact of red meat on the environment
b) if Americans would reduce a little their red meat consumption, the entire world could benefit in terms of less CO2 emission
c) if you offer that amount of meat at half the price of your competitors, I suspect that we can have a lot of concerns about how cows are breed and the trend about animals fair breeding is a fast growing one.
From my point of view it may make sense for people still not into these consideration but on the other side they should move quickly to something more sustainable.
And this”launch of the ‘bigger, premium’ burger nationwide” is not the answer.
It’s an old economy tactical answer to the current economic situation.
Hi Gianandrea,
Thank you for weighing in here with another perspective. I respect everyone’s opinion. The fact is: many people around the globe eat and enjoy red meat. I don’t expect that to stop. We Americans love our beef, Europeans and Middle Easterners around the Mediterranean enjoy lamb, pork is a favorite around the globe, etc. Perhaps the best answer to the dilemma you raise is for our medical communities to continue to push healthier diet concepts on all of us. Reducing the amount of red meat we eat and focusing on more fresh fruits, vegetables and fish is good for all of us.
As for McDonald’s, I expect the new Angus burgers to do well. The company is so large and has so much purchasing power, it can offer premium beef for less than its competitors. I do not believe this meat will be of poor quality. If it was, they would quickly be found out and denounced for it. . .a risk they clearly wouldn’t want to take.
Thanks, Gianandrea. Great to hear from you.
Ted, thanks for your answer.
I do not expect people to stop eat meat, too.
But I recently found a couple of figures that drove my comment above.
In Italy there are 6 millions of vegetarians (more than 10%)
They were 2 millions five years ago.
They are expected to double in the next five years.
When a country like Italy, with a culinary tradition heavily involving meat and fish, has between 10% and 20% of people just not eating meat, this is a clear sign to me of a deep change in eating habit.
As well as I think about the web is playing a key role in turning people away from meat (simply think about how many thousands times video about feedlot are seen).
I’m not vegetarian, for the moment, but I love to know if the meat I eat comes from an animal that was feed and breed ethically.
I understand what you’re saying very well, Gianandrea. There are more vegetarians and vegans than ever before in our country, too, although I don’t have the numbers at hand.
Agreed: raising animals for the sake of meat is an increasing focus for producers and consumers. There are producers in the U.S. like Coleman Natural, for example, who abide by strict guidelines in their treatment, feeding and breeding practices for poultry, pork, etc. Grocery chains like Whole Foods offer meat, poultry and fish that are raised organically as much as possible; ethically treated and slaughtered. Consumers who care about these issues have shown a willingness to pay more for these products.
Thank you for adding a great deal to this conversation, Gianandrea. I appreciate it.
I think this is a great move for McD’s. People are looking for inexpensive ways to treat themselves. An upgrade to a fast food burger is much cheaper than sitting down at a fast-casual restaurant where you are expected to tip.
I’ll be trying one. This will cure my burger craving without making my wallet OR my tummy hurt. I expect I’m exactly the consumer they’re targeting with this.
It’s not going to alienate existing customers, who will most likely ‘aspire’ to the new McD’s elite level of McCafe’s & angus burgers(anyone remember Thorstein Veblen??), while middle-class folks will find a McD’s they can finally get on board with.
Holly,
You’ve said some very insightful things here, and I thank you. First: “People are looking for inexpensive ways to treat themselves.” Right.
Secondly, “It’s not going to alienate existing customers, who will most likely ‘aspire’ to the new McD’s elite level of McCafe’s & angus burgers. . .” You’ve hit on something here. McD’s customers who already purchase other sandwiches can either stick with their favorites or they might be tempted to try a new Angus beef burger. For the most part, though, I do think the fast food chain is trying to appeal to the customer who would usually go to TGI Friday’s or a similar chain. If they succeed, then they will attract customers who weren’t necessarily McDonald’s customers in the past.
Good stuff, Holly.
Ted,
I have to say on a personal note, I eat McD’s when I want to spend $300 on an entire lunch. If I want a good burger I will go to Carls Jr.
On the business side, I am sure this will do very well for them. There are people out there that I know personally that eat at a McD’s at least once a week. I say yuck, they say, indoor playgrounds!
Note from above: I meant $3.00….wouldn’t it be nice to have $300 for lunch!
Hi Lucinda,
Thanks for weighing in. You’ve made an important distinction here. Many consumers who want a value meal, think of McDonald’s. But if they have a favorite restaurant when it comes to premium burgers, they may resist McDonald’s new Angus burgers and go to their favorite haunts. And yes, playgrounds aren’t a draw for all of us!
P.S. I knew you meant $3.00.
Thanks, Lucinda. I appreciate your comments.
This is a great move by McDonald’s. The concept of “cheap luxury” is a winning one in the current economic climate.
Hi Charles,
As the recession deepens, people are looking for inexpensive ways to treat themselves. Agreed. I also agree with you that this seems like a smart move on the part of McDonald’s. Thanks for adding your voice to this post, Charles.
Ted,
A fantastic example for all businesses out there on how to grab market share in a down economy. While most busineses are focussed on how they can discount themselves out of business, McD’s have decided to go after a more upscale market.
My vote is it is brilliant and one I will use in my coaching. Thanks
Thanks, Steve, for weighing in and for the kind words as well. Agreed. If retailers or consumer product manufacturers want consumers to part with their money these days, it’s a good idea to offer great value, create excitement or delight them in some way. While it may seem counter to launch new products or innovations in a down economy, it is often the best time to do so.
Please feel free to use this post in your work, Steve, with my best wishes.
The problem with America’a dietabetic society is not eating beef or anything else.
The problem is the amount of calories consumed. Eating less than 2000 a day of almost any variety of foods is an adequate diet.
You can get never a frozen cheeseburger,
fresh cut fries, and a large drink at In and Out for under $5. That is quality and value.
Unfortunately you can only experience the great meal, with great employees, and a ultra clean facility in the West.
Right, knowhow: no matter what we choose to eat, it’s important to weigh our choices carefully so that our total daily intake doesn’t exceed a certain calorie level. Note: that’s a different number for growing kids, teens and adults. Even among adults, this varies according to pre-existing conditions or the need for dietary restrictions.
Majorkahuna: you did not indicate whether you live outside the U.S., but from the gist of your comments, it looks like it. Since McDonald’s restaurants are all over the globe, I’d be interested in finding out whether the stores in your area are NOT delivering a good customer experience. Please let us know.
Thanks for weighing in, guys. I appreciate the comments.
I have tried the Angus burger and it is great. When my child begs to go to MacDonald’s I now know I can eat a tasty burger while she has her Happy Meal. Four dollars is cheap at the price.
Jane,
I’m sure many McD’s customers echo your sentiments. Angus is great beef. $4 bucks is a great bargain. I’m sure the recent flurry of ads announcing the new burgers have made them a huge hit. Thanks for weighing in, Jane.