Just an observation of AdLand politics…
Bendigo Bank did a kitschy ad a while back around the theme ‘Community’. Alone amongst all of the banks they’re able to work the fun factor, and quite well. In case you didn’t see it…
Hope you listened carefully, because it’ll sound familiar in one of the latest Maccas ads…
Either someone was very quick to build the warm and fuzzies out of a feel-good ad, or there’s an ad agency out there with a penchant for indie music and fat paychecks. (Wait, I just described every ad agency. Scratch that. Someone’s in love with Her Space Holiday.)
Filed under: 1 | Tags: Australia, economics, McDonalds, pricing strategy, strategy
McDonald’s has caused a furore – not because they’re killing us this time, although they’re still doing that – for their new pricing strategy.
When deciding their prices for the new year, the company will be suggesting to its franchisees a demand-based increase.
It’s simple: if your store has higher demand, your prices will increase more.
From the ‘leaked document’ this will mean that generally prices will rise in low-income areas and
They seem to be calling this a ‘price optimisation strategy’. (See their recent 10-K form.)
Fine, if you feel you can charge more then general business rules suggest you’d be creating waste if you didn’t have a price increase.
But…
- Any first-year econs student can point to a P-Q graph (holding a precious burger in their other hand) and tell you that a price increase will most likely lead to a decrease in demand. Are they trying to level demand out across their stores?
- Low-income areas will definitely take a hit in demand from a big price increase – they go to McDonald’s because it’s quick and cheap. It’d be a mistake to take one of these factors away from their key clientele.
- Funny phenomenon – I know at least a few people who just won’t bother buying something they know will be cheaper elsewhere. They’ll travel to the other store or just find something else. If there is no way of doing either of those, they build a general resentment towards that brand. We know when we’re being exploited. (Most of those people are asian, I grant you.)
- The brand backlash will be pretty huge.
Especially now that the tabloids have picked up the story and are running with the ‘discrimination against the lower classes’ line.
The initial leak was ‘exclusive’ to the Herald Sun which explained the demand basis, but subsequent articles have jumped on the tail with their take.
Aussies love nothing better than a story of the battler up against the big man, and unless a union dispute blows up soon the reporters will be dining out on Micky D’s for the next week. Not in a good way.
So yes – you might be able to charge more, but is that really a great long-term strategy? Sure, bad PR will largely be short-lived, but so will the extra benefits.
Some locations – hospitals, remote areas, airports – could get away with this. But should they?
Will be waiting to see how this is executed, and what the company’s next action will be.
Was surprised to hear about Japan’s new QUARTER POUNDER stores – yes, that’s right, the humble McDonald’s burger now has its own store.
I haven’t been this intrigued by McDonalds since discovering that they do home delivery in Singapore.
I’ve blogged full details here at Brandcurve.
Will be VERY interested to see whether this works out or not.