Tuesday, May 5, 2015

McDonald’s Failed Turnaround

The good news for McDonald’s is that it has a turnaround plan. The bad news is that the plan doesn’t make sense and will never get anywhere. Realizing that U.S. consumers have taken to avoiding McDonald’s, the burger chain is trying to bring former customers back in. Unfortunately it isn’t willing to do what needs to be done. The two keys to McDonald’s plan are:

  • Cut costs
  • A marketing campaign to improve the public perception of the quality of its food

The misgivings with this plan should be obvious. The two areas where McDonald’s falls flat on its face are the quality of food and quality of service. Cutting costs can’t possibly improve either. If you weren’t willing to stand in line for 30 minutes to get food that is a step down from the supermarket freezer, then why would you be willing to wait in line for 35 minutes to get food that is two steps down in quality? Meanwhile, if the forthcoming ad campaign succeeds in getting former customers to return, it will only hurt the chain’s reputation all over again. Imagine hearing that a restaurant sells “real food” now, only to go in and find out that the food is the same tawdry fare as before, but with a few more corners cut in the preparation to save money. Do you think you might respond by saying, “I will never come here again, and this time I mean it”?

Why can’t McDonald’s improve its wretched food? There are two reasons. First, it has invested billions of dollars in the factories that churn out this stuff. An investment on that scale can’t be retooled at the drop of a hat. Second, McDonald’s really honestly doesn’t understand what’s wrong with its food. McDonald’s executives know they don’t eat their own food more than they have to, but they haven’t stopped to think about why that is. When they talk about the nutritional value of their products, it’s in the language of 1970, the dark ages of nutrition when we had barely learned that vitamins and minerals existed. We now know that there is a nutritional difference between fresh food and processed food. It stands to reason when you think about it that there might be a difference between meat in its pure form and meat that’s been smashed to bits with the processed-food equivalent of an air hammer. McDonald’s is living in a time warp in which this difference doesn’t exist, but the vast majority of its potential customers are becoming more food-conscious and have learned that food is not all the same.

McDonald’s also says it will start listening to its customers again. If they follow through on this promise, the message that should come through loud and clear is, “I know there’s something wrong here, I just don’t quite know what it is.” McDonald’s customers tend to be at this stage, because once they figure out what’s going on, they become former customers. McDonald’s reaction on hearing this should be, “We’re a huge, well-funded corporation. We can find out what’s wrong, and we can fix it!”

Okay, that doesn’t sound likely, but I can dream, can’t I?