Essay Sample on McDonald's STP Strategy

Introduction

In the present world, Segmentation, Targeting, and Positioning(STP) is a formidable marketing strategy that ensures success for the companies that choose to apply it. In this report, we look at McDonald's, which is a global fast food outlet and how it has employed segmentation, targeting and positioning strategy to its benefit to ensure its financial success and the subsequent meeting of its objectives. As is outlined by (Hanlon, 2018), this marketing strategy is audience focused rather than product targeted. Therefore, this enables the delivery of information to financially appealing customers. This model relies on a particular mode of operation, namely; market segmentation, onto target marketing and finally product positioning. McDonald's can then choose the appropriate marketing mix. The research looks at McDonald's marketing strategy for the year 2017 in the United States region.

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Objectives and Competitive Advantages

Objectives

At the beginning of its financial year, McDonald's set out to ensure that it had not only the most substantial niche in the food industry but also the best quick service restaurant experience (Dhaliwal, 2017). This would be actualized by ensuring emphasis on freshness. Dependability and sustainability of its food supply as is documented on (Dorling, 2018). McDonald's also listed among its objectives, to provide an exceptional customer experience. Since McDonald's goals center on customer experience, the market strategy of segmentation, targeting and positioning relies on the 5ps; people, place, price, product, and promotion.

The objectives were geared at ensuring the customer has the best experience while being at McDonald's. Goals would then be achieved through undertaking large scale promotional effort and advertising to provide a high number of customers visit their 1200 branches throughout the various states in America. In doing so McDonald's achieved sales of over 22 billion dollars for the 2017 financial year (Statista, 2019). For the year 2017, McDonald's gained a large niche of the American fast food market share. Seeing as it's the biggest user of beef in the world, customers consumed an estimated 30 tons of meat throughout the entire year. Most of the products served by McDonald's are suited to serve a diversified target market. This, therefore encouraged McDonald's to come up with a varied menu to cater for a vegan niche of customers. Over 95%of the raw products are sourced internationally (Vignali, 2015). This, therefore helped to grow the brand worldwide as it was easier to develop it in your backyard and send it to the table directly in those countries. It was therefore not a challenge to acquire fresh produce and meat. This further enabled McDonald's to achieve its goals to provide fresh food and be dependable and sustainable to its customers not only in the American market (McDonald's, 2019),

America has over 1200 McDonald's outlets throughout the entire country. It is the biggest fast-food franchise in the country with an estimated four outlets opening each month in different states. (Burn-Murdoch, 2018) Documents that in America alone, there are more McDonald's outlets than there are hospitals the newer restaurant outlets attract estimated yearly customer traffic of over 1million new customers. Coupled with their iconic branding and color scheme, McDonald's outlet is impossible to mistake. This same iconic branding has been repeated throughout various countries to carry its badge and emblem further increasing its popularity to newer markets and newer customers. Their ability to provide fresh food and be dependable has enabled them to retain their American customers who in the 2017 financial year generated 22.82 billion dollars in revenue.

Competitive Advantages

McDonald's strategy of segmentation, target marketing, and positioning has enabled it to achieve a competitive advantage over their competitors in the following ways

Net Competitive Advantage

At the end of the 2017 financial year, McDonald's had made a total of 22.82 billion dollars in revenue. This was a considerable markup even though their product life cycle graph showed that they were in a decline phase as illustrated by (Statista, 2019). This was as a result of the organization's decision to undertake to target marketing and tailoring their brands to fit a particular market. For example, while opening a new branch in India, McDonald's faced a challenge in that Indians neither eat beef nor pork. They, therefore, had to come up with a new menu to suit their target market. India has a population of over 1 billion people. The billion people economy is expected to generate 26 billion dollars in revenue at a growth rate of 18% over the next year (Trefis Team, 2017). Therefore, it was a huge market that they could tap from by carrying out target marketing and brand positioning. McDonald's remains to be the world's leading fast food retailer with billions in revenue each year. Unlike its competitors who don't rack up as much profit, McDonald's is still very much in the lead, therefore, giving them an edge over their competitors. The extra profit margin enables them to be able to diversify their product, segment their targets accordingly, target newer markets, position their brand appropriately without incurring too high losses (ET Bureau, 2018).

Striving to Be Cost Leaders

Through segmentation, McDonald's has been able to acclimatize with the various societal expectations and norms around America. For example, the target market for McDonald's in Beverly Hills is not the same as the McDonald's in downtown Brooklyn or the Bronx. Therefore, the prices of products may have a slight variation without compromising on the quality of service or the product itself. It is likely that products in the Bronx are a bit cheaper since the population there is assumed to be of lowly paid workers unlike in Beverly Hills where the community comprises of affluent individuals. Despite this price difference, McDonald's is still able to hold the niche for reasonably priced food items across the fast food industry (Leggio, 2017).

Speedy Food Delivery

Through brand positioning, McDonald's has been able to ensure quick food delivery throughout America. This has been made possible by the fact that there are over 1200 outlets spread out through America. In the case that one is living in an urban area, they are highly likely to be 10 minutes or less away from a McDonald's outlet. Their specialized drive-through system enables one to receive service in less than 5 minutes CITATION Dar19 \l 1033 (Chen, 2019). By positioning their brand closer to the target markets, McDonald's rakes in an estimated 10 billion dollars from customers who only go there because it is close enough. They also provide after sales services such as home delivery where one can have food taken up to their doorstep. This is both an efficient and effective way to ensure customer acquisition and retention.

Strategy

McDonald's strategy of segmentation, targeting, and positioning was and still is a critical strategy for the achievement of its goals and objectives. Key target markets were segmented according to geographic, demographic and behavioral segments CITATION Joh16 \l 1033 (Dudovskiy, 2016).

Geographic

The criteria for this segmentation was region and density. On region criteria, it was relevant to know whether the population was either domestic or international. Under frequency, it was critical to understanding whether the community was either rural or urban. This criterion was chosen to determine the target areas they were most likely to achieve high sales.

Demographic

Under this segmentation, the criteria were age, gender, income, and occupation. On age, menus were constructed for ages 5 to 65; gender was either male or female. Under income, it was considered for low and middle-income customers. Under occupation, it was considered students, employees, and professionals of any field. This criterion was used to determine the target market of the products and how they would need to modify their menus to suit their population. A high number of customers were between ages 13 - 32 who were of low and middle income and were highly likely to be students and or employees

Behavioral

The criteria for this segmentation included benefits sought and personality. Under benefits sought, was considered cost benefits and time efficiency. Under character, was deemed to be easy going and careless. This criterion was chosen because they needed to identify the method of brand positioning they would use to suit their consumers.

The organization differentiates itself from other organization in that it has a large market share thus high sakes which enable it to open more and more branches not only within America but also in other countries globally. It differentiates itself from other food outlets through its strong reliance on excellent customer service, use of actionable marketing strategies and acute response to would be competition (Profit Works, 2019).

McDonald's employs the 5 Ps; Product, Promotion, People, Place and Price to ensure that they are above their competitors. McDonald's only uses products of the highest quality from the best of specimens, for example, the best beef and the purest of vegetables to ensure a healthy and crisp eating experience for the customer. McDonald's undertakes to large scale promotional effort to provide increased awareness about its products at all times despite it being the leading fast food outlet in the world. McDonald's relies on a vast number of personnel to ensure it works smoothly, both employers, employees, about 375,000 of them (Cain, 2019) and customers. McDonald's is distributed throughout various strategic places unlike its competitors thus ensuring its success over them.

Conclusion

Overall, the segmentation, targeting and positioning market strategy used by McDonald's is a resounding success that had proved useful since its application in 2005 when McDonald's was experiencing a decline phase. Through its form, it has resulted in billions of dollars being made in revenue by the fast food giant. I recommend fast-tracking of the same process again, or incorporation of a newer marketing strategy since the fast food giant is heading towards a decline from its peak in 2014 where revenue totaled 27 billion dollars.

References

Burn-Murdoch, M. C. &. J., 2018. McDonald's 34,492 restaurants: where are they? [Online] Available at: https://www.theguardian.com/news/datablog/2013/jul/17/mcdonalds-restaurants-where-are-they

Cain, A., 2019. McDonald's drive-thrus - facts about McDonald's that employees know and most customers don't. [Online] Available at: https://www.businessinsider.com/mcdonalds-jobs-insider-facts-2018-4?IR=T

Chen, D., 2019. 75 Mind-Blowing McDonald's Facts. [Online] Available at: https://www.rd.com/culture/mcdonalds-facts-trivia/

Dhaliwal, G., 2017. McDonalds Marketing Goals, Punjab: Punjabi University.

Dorling, S., 2018. Objectives of McDonald's. [Online] Available at: https://bizfluent.com/info-8360450-objectives-mcdonalds.html

Dudovskiy, J., 2016. McDonalds Segmentation, Targeting, and Positioning. [Online] Available at: https://research-methodology.net/mcdonalds-segmentation-targeting-and-positioning/

ET Bureau, 2018. McDonald's still running its outlets at a loss in India. [Online] Available at: https://economictimes.indiatimes.com/industry/services/hotels-/-restaurants/mcdonalds-still-running-its-outlets-at-a-loss-in-india/articleshow/64471955.cms

Hanlon, A., 2018. The segmentation, targeting and positioning model. [Online] Availa...