Market Segmentation of McDonalds - Case Study Example

Market Segmentation Table of Contents Table of Contents 1 Market Segmentation 2 Executive summary 2 Introduction 3 Market Segmentation 3 Positioning Strategy 9 External Factors Influencing the Target Audience 11 Recommendation and Conclusion 12 References 14 Market Segmentation Executive summary The article is more focused at achieving a complete market segmentation of McDonalds. The article focuses on a primary target audience. The main targets aimed by the market segmentation are children. The article also identifies key research methodologies that will be used in identifying the target audience for McDonalds. The article will also focuses on the market strategies that will help in market identifying a sizeable market positioning putting in mind the target audience appropriate for the company. At the end, of the article suggestions of how to improve on the company considering the market segmentation have been recommended. The key purpose of this study is to present a business plan that will see McDonalds accomplish complete market segmentation. This is aimed at helping it realize maximum sales in the marketing of its Happy-meal product amongst its customers who have various tastes and preferences. Introduction The main purpose of this business plan will be to answer a question concerning McDonalds and its main target market and its market segmentation strategy. To help answer this question the article will look at the 4ps of marketing this being the price, promotion, product, and place. By covering this area, this study will identify the appropriate market segmentation for McDonalds' Happy-meal product. By performing complete market segmentation for McDonalds, the study will achieve the goal of identifying the appropriate Happy-meal segment. In order to have complete market segmentation, a complete research methodology will have to be done. The research methodology will contain tree basic elements that will help in answering the question at hand. The first methodology that will be used in researching and completing this business plan include the internet, books on market segmentation, complete analytical review of McDonalds, accounts. Market segmentation allows McDonalds marketing policy to put focus on the division of prospects likely to buy its output (Cross, 2009). Market Segmentation When market segmentation is efficiently done, it may help McDonalds gain enormous returns in their expenditure, in marketing. There is a difference in McDonalds’ consideration when giving a definition of market segments. This depends on whether McDonalds is selling their products to businesses or individuals. McDonalds should establish a category of need that is satisfied by their products. Strategic classification of category of need takes into account that McDonalds’ products are crucial to its objectives, mission, and operational supervision. For example, a service that evaluates opportunities of investment applies to this influence domain (McDonalds History). The decision of purchase in this particular category of products is made by McDonalds’ executive managers. Operations classification of category of need takes into account the fact that McDonalds’ products affect the operating procedures and strategies. In this classification, the decision of purchase is made by McDonalds’ operations manager. Functional classification of category of need considers the fact that McDonalds’ products deal particular functions within the company, for example, control of inventory, manufacturing, maintenance, and accounting (Jay, 2004). The functional manager controls this domain. Social opinion classification takes into consideration the fact that McDonalds’ products offer satisfaction to emotional wants of consumers. The business plan should contain a segment of needs which identifies the need and who is likely to be affected by that need. McDonalds’ segmentation is to be determined by matching gains from McDonalds’ products and the prospect’s need. Categories of need for the company’s segmentation will include the following. Need to reduce expenses of McDonalds, which includes right sizing the company. The need to improve McDonalds cash flow including the target market in areas of expensive urban life that can afford McDonalds Happy-meal product. Need to improve McDonalds’ productivity, which targets highly populated areas. Need to improve McDonalds’ product quality, which considers complex technology in production. Additionally, there is a need to improve McDonalds’ service delivery in the markets that are highly competitive with further improvements in the working conditions of employees. The focus should also dwell in improving McDonalds’ share of the market for its new product (McDonalds History). In order for a company to make a profit and last in a highly competitive market such as McDonalds’ is in, it is paramount that it understands what target customers it is aiming for. Every company in the world has target customers that it focuses to fulfill its obligation. The main advantage of having target customers is that it helps in minimizing the chances of an error by about three quarters. There are factors that are considered when choosing a target audience for a company. For instance, a company may choose its target customers by the type of product they are offering others by the type of location the company is situated from and others by the type of raw materials they use. This is deferent factors help in choosing deferent targets for the market. In order to run successful market segmentation for McDonalds, one must understand the type of product and service they offer (McDonalds Corporation 2010 Annual Report). McDonalds has one of the biggest chains of restaurants selling hamburgers. It offers this service to millions of people around the globe ranging from the rich to the poor from economically stable countries to developed countries. The Company has its headquarters in America. However to operate world wide the company sells its name, which is also, known as franchising to business people who are able to keep up the quality standards of the company's name. For more than 56 years, the company has operated serving its customers with the best quality hamburgers possible. While carrying out a market segmentation on the company, the three most crucial thins to look at are the demography this being the social statistics of a place such as population among others. The psychographic that looks at the personality traits of the target audience, and lastly the behavioral of a given market or target audience. This constitutes of the reaction given to a certain product or service by the deferent target audience (Charles, 2011). While doing complete market segmentation on McDonalds, one must consider the fact that the company offers a variety of other products besides the Happy-meal. Rather one should consider the fact that the company offers a whole range of products, which target different types of consumers. For instance, McDonalds has different products for students, kids, working parents and non-working class. In a move to win more customers, the company keeps on introducing new ways in which a customer receives quality product. However, one of the key areas that the company has not done complete market segmentation is within the adults group. In any company, it has always been hard doing a complete segmentation within this targets group for a few varied reasons. For instance, there has always been a constant argument and difference regarding the term adults. Some people reckon that adults start from twenty-five while others think that eighteen is old enough to be regarded as one (Jay, 2004). These differences have made it hard for companies including McDonalds to carry out a complete market analysis base on the target customers in that category. However, the most common solution that can be applied at such target is not by segmenting them by age but by economical background. This will help McDonalds to be able to optimize its profit by delivering the best quality service to target audience classified as adults it is meant t look at the financial background of the group. This can be achieved by looking at the different aspects like location economic stability and product worth. This specific segmentation is meant to achieve total sale while keeping the target constantly in mind. However, the company has to remember that all products offered to different groups must all be of top quality. This can be achieved by downsizing in the economic sector while focusing on increasing quality thus the result being increased income for the company (2010 Form 10-K, McDonalds Corporation). The production of quality products like hamburgers and few assorted food should not be a point of discussion. The company has grown and gained fame by offering high quality products so even by reducing their prices the quality should not go down. This strategy in segmenting the market will see the market divide the market into potions of smaller manageable segments that the company can use to optimize its profits and still maintain consumer satisfaction. This division of the market will make it easy in many ways for the company to be able to deliver according to what deferent consumers want. The reason why location segmentation is considered the best in such product segmentation is that by applying it the company McDonalds is able to deliver the deferent wants and needs that customers have. Different locations have a different culture, which means that different cultures have habits and wants (Stephen, 2004). In the case of McDonalds, different strategies are meant to be applied in order to get the correct market target for the company. Different lifestyles are one of the main aspects that contribute in market segregation. McDonalds’ effective segregation will see tom it that all product it offers her a variable target of its own. That does not mean that targets cannot shear a product. However, products are aimed at people with the same characteristics which means that either this people come from the same region or have the same lifestyle in order to avoid errors by the company. McDonalds’ market segmentation of a country can be done in three different bases. This basis will help the company achieve and maximize it profit to something manageable by the company. McDonalds offers different products different groups by using demographic segmentation. While demographic includes a few aspects, the company can divide its clients by use of age demography (Love 1987). The use of age demography to achieve company satisfaction is mostly seen because in most cases while marketing a product age differences always come to play. This scenario is best described using with the company's Happy-meal. This strategy is meant to make sure that kids are happy with the product being offered by McDonalds. Happy hour can be described as a product of McDonalds, which comprises of a meal that comes with toys for kids. This strategy in market segmentation is meant to achieve complete customer loyalty, which in turn will mean that McDonalds’ income will rise. While choosing an appropriate segmentation that will work with kids, the first thing one focuses on is the impact the product has on children mostly mentally. Kids are made happy with small things such gift raps (Charles, 2011). Unlike adults who mostly look at the price, children mostly look at externally different aspects when it comes to choosing a product. Most children will order a McDonalds Happy-meal for the simple reason that they are getting a free toy with the meal. By using this strategy in delivering a product to the selected target audience, the company will have performed segregation by use of demography. Adults in these articles can be classified into two categories. The young adults by this meaning those still in school who can be thought of as students and those who are working this being parents. These two categories of people though in the same category cannot be thought to have the same wants and needs towards a product. For instance, young adults this including teenagers will not consider prices as much as they would consider the trend or meal being offered. Price for one will have to be a bit cheaper. However, price in not their main concern. What concerns students more is the trend, which can be identified as the growth of the country (McDonalds Corporation 2010 Annual Report). In today’s world, dynamics are changing and changing fast. One way in which to get teenagers is keeping up with the constant changes that are taking place. This can be achieved by setting up an environment around McDonalds where students can come and hang out and fill comfortable being there. When it comes to adults this being parents of at list the ages of thirty and fifty what they mostly care more about is the prices. Considering the unstable economy and the rise of inflation pricing should be one constant aspect that McDonalds should seriously put in mind. Most parents aim at spending the least amount of money, and have the best quality of food. If parents are going to spend their money buying fancy food, then McDonalds should offer the best service it can (McDonalds’ Publication). Positioning Strategy Positioning includes implementing McDonalds targeting. McDonalds chose to locate itself as a major producer of foods. It has to do enormous advertising to promote its commodities. The discipline that McDonalds as a market leader has falls in the following three categories. Operating as a successful company in the fast food industry, McDonalds can maintain an enormously rich competitive advantage through maintenance of excellent efficiency. This enables it to provide excellent services to the consumer at a proportionally lower price than competitors do. The company also emphasizes on low cost of production, keeping the quality of products high. McDonalds also can embrace a broad system that predicts when particular supplies are needed. By using the customer confidence, McDonalds can excel in providing and servicing specific needs, which make it more competitive than the rivals need. In most cases, McDonalds is considered to have positioned itself in providing specific food, which is aimed at one genuine target (Love 1987). By using this type of positioning the company will need to be more efficient hence reducing the chances of getting me wrong he methods helps in achieving a more open role for the company, which in term helps in connecting emotionally with the clients. McDonalds has positioned itself for a long time as a service-offering company in terms of food services. However, the changing world dynamics makes it hard for firms like this to survive for longer periods. Technology has to be applied in terms of making the company more effective and more rigid. This will help in improving in the service delivery and will help in improving the quality of food offered by McDonalds (McDonalds’ Publication). The incorporation of technology in McDonalds' positioning will help it to realize substantial revenue from selling its Happy-meal product. This will help In achieving a target audience from the company positioning. Technology can also be use in advertising the company. This means that the use of technology in advertising will help the company in enhancing the Happy-meal brand to cover a wider scope of the market. The most effective advantage farms have when t comes to positioning is that customers are able to identify the farm with how it is positioned. For instance, McDonalds stands to achieve more from positioning because customers have already identified with its brand of food (McDonalds’ Publication). External Factors Influencing the Target Audience In order to achieve a complete analysis and segmentation of the target audience, McDonalds will have to look at the external factors that might affect the company in the future. This means that the company will have to run a total risk assessment looking at both the competition and at the same time looking at factors that might affect the company in the future. This will help the company to develop effective mechanisms to deal with the problem when it appears in the future. For instance, in the real sense McDonalds does not have a real threat in terms of competition considering the fact that it is worldwide acknowledged. However, some companies can be said to be crucial threats to the company. For instance, Burger King can be considered one of the biggest threats the company has (2010 Form 10-K, McDonalds Corporation). Burger King is considered to the big threat to McDonalds because it offers the same product as McDonalds. It is also considered a threat because it has a significant effect on the pricing of hamburgers. Burger Kings has influenced the way McDonalds does business at one point it was considered to have achieved much more revenue something that made McDonalds go back to its drawing board. Other companies that are considered threats to McDonalds include companies like Subway, YUM Foods, Starbucks, and the Arby’s Group among others. This shows that the field that McDonalds is in is highly competitive and fast growing. In order to overcome the risk that comes with competition, McDonalds will have to upgrade its system and make sure that the marketing team is well equipped in terms of selling information to appropriately market the Happy-meal product (Love 1987). In order to avoid the risk of losing its clients to competing companies in the same industry, McDonalds should reestablish the trust. This helps in making the customers feel trustworthy towards the company. It also helps in creating a lasting relationship with its target audience who are identified by the demographics of the company (Stephen, 2004). Recommendation and Conclusion In order to achieve the crucial aspects discussed in this study, a few recommendations have been suggested. First, McDonalds has to use the social media and mass media to advertise and communicate to their customers. For instance, the company needs to use social media such as Facebook, Twitter, YouTube and other social sites to be able to communicate to the new age generation. This is because statistics show that most people in the world are connected. By placing an advertisement on the social media, many people will be able to view it at once. However, moving away from the hype that comes with social media mass media such as television and radio is still considered the best way of advertisement (Charles, 2011). This is because it helps in getting to clients and delivering the message in a more personal view. Television is one of the most common ways of advertising a product since with television, the imagination that is applied to a given product helps in selling the product. McDonalds need to apply emotional advertisement appeals, which will help in connecting with the target audience. For a commercial to be considered successful, it must apply on the emotions of the audience forcing them to buy the product being offered. However, while, applying this strategy the company has to consider the ethical background that might affect the target audience. This are either issues to do with morality and the implication of the product (McDonalds’ Publication). References 2010 Form 10-K, McDonalds Corporation. United States Securities and Exchange commission. Retrieved 2011-09-24. Charles, S. (2011). The Big Mc. New York. Routledge Cross, R. (2009). Inside Hamburger Central. Chicago. Walls press Jay P. (2004). McDonalds: International Directory Of Company Histories. New York. St. James Press. Love, John F. (April 1987). Big Mcs, Fries. Financial Executive McDonalds Corporation 2010 Annual Report. McDonalds Corporation. 2010. Retrieved 2011- 09-24. McDonalds History. Aboutmcdonalds.com. Retrieved 2011-09-24. McDonalds’ Publication. "Corporate FAQ". McDonalds Corporation. Retrieved 2011-09-24. Stephen, E. (2004). McDonalds: The Journey To Health. London: Sir Harry press. Read More