McD’s first loyalty program will come with free fries

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Discussion
Mar 14, 2016
Tom Ryan

Watch out Starbucks! McDonald’s is ready to launch its first full-fledged loyalty program later this year or early in 2017.

“We’re working on a customer-designed loyalty program that we think will be as good as there is out there in the marketplace,” Mike Andres, McDonald’s USA’s president, said last week at the UBS Global Consumer Conference.

The fast food chain currently has a “fundamental basics, kind of punch card approach,” according to Mr. Andres. Launched nationally last October, the McCafe app basically features a restaurant locater and nutritional information. The app already has 7.5 million downloads.

As a loyalty incentive with the initial McCafe app, members — who provide their location and email address — earn a free beverage after five drink purchases, such as coffees and shakes. The upgraded loyalty program, according to Mr. Andres, will be “more robust,” linking rewards to other purchases and likely visits per month. Points will likely have a time limit to entice customers to use them.

Mr. Andres said the chain wants to ultimately move “to this point of mass personalization where we talk to each of our customers individually based on what their needs are. … If we see them falling off, we can entice them with their favorite products to come back. That’s the future, customer relationship management, and we think that’s going to be a significant sales layer for us.”

A strong loyalty program could be of help in competing against Starbuck’s and Dunkin Donuts.

My Starbucks Rewards has 11.1 million members, and Dunkin’ Donuts’ DD Perks program has 4.3 million. Both offer mobile ordering. Starbucks’ program stands out for its ample drink and food rewards, custom offers via e-mail, and free drink on each member’s birthday.

Nation’s Restaurant News noted that McDonald’s has been building up its digital team to better tap customer-facing technology. Margo Georgiadis, president of Americas at Google, joined its board last year.

Source: Google Play

DISCUSSION QUESTIONS: How receptive will consumers be to McDonald’s loyalty program? Do you think McD’s should largely mimic Starbucks’ My Rewards program?

Braintrust
"The McDonald’s product is differentiated from Dunkin’ Donuts and Starbucks, but there is an element of parity in that competitors each have some form of loyalty program, while McDonald’s has not gone beyond games, discounts and sweepstakes."
"If McDonald’s wishes to increase trips, which appears to be the strategy, it should not mimic Starbucks approach because it emphasizes spend rather than trips. After Starbucks switched the reward basis from visits to spend, purchase intent dropped 9 points."
"McDonald’s has a segment of their customer base that is highly loyal and frequent, so this type of program should work well. The structure of the program should be based on the company’s strategic goals — the program cannot serve too many masters or will run off the rails."

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18 Comments on "McD’s first loyalty program will come with free fries"

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Zel Bianco
BrainTrust

The recent uproar over the changes to Starbucks’ rewards program makes me think that McDonald’s should probably try to emulate the old system. Regardless of approach, having a loyalty program, particularly one that would earn a free drink after five beverage purchases, is a good idea. This may sway the budget- and deal-conscious to stop by McDonald’s for their morning coffee and bring them in on a daily basis. Plus, once you are in a McDonald’s it is much more difficult to resist those Egg McMuffins and hashbrowns.

Adrian Weidmann
BrainTrust

As Mr. Andes noted, customer relationship management is the goal of loyalty programs. They aren’t designed to reward your customers — they’re designed to entice a customer to come back to the store and spend more money. While the McCafe app has been downloaded more than 7.5 million times, it would be interesting to learn how many of those downloads have translated to more than 1 or 2 active uses. I’m not convinced that this program will increase the actual number of customers or purchases for McDonald’s, rather it’s just another tool to maintain the attention of existing McDonald’s fans. Perhaps that’s enough?

The bigger challenge for McDonald’s is how to capture the attention of Millennial and Generation Z shoppers. This program seems to be a tourniquet to slow the bleeding as opposed to a legitimate strategy to turn things around at McDonald’s.

Max Goldberg
BrainTrust

Consumers will be receptive if the program offers lots of basic rewards (free drink, free fries) that are easy to attain. McDonald’s has the benefit of being able to bring numerous low-cost food items into the loyalty scheme. For regular McDonald’s customers this could be a program that they would welcome.

Ryan Mathews
BrainTrust

First of all, most of these kinds of loyalty schemes end up rewarding existing customers. The notion that you will be able to woo a declining customer back seems a little far-fetched, and the notion of attracting new customers and holding them — especially if you are McDonald’s — may be a marketing bridge too far.

I’m sure McDonald’s loyal customers will love an enhanced program, but I’m less sure it will increase their spend. As for non-customers — and I confess to being one — I don’t think a free order of fries is going to change our minds.

That said, McDonald’s ought to pay close attention to the recent changes in Starbucks’ program, which began by rewarding frequent small-ring customers and has now been forced to course correct to reward large spenders.

Clearly, giving away the store isn’t as easy as it looks.

Camille P. Schuster, PhD.
BrainTrust

Rather than decide to follow Starbucks’ old or new program, McDonald’s should think carefully about what its customers want. The changes to the Starbucks program created an uproar, that means McDonald’s should stick with its first program. It is critical to think through the offerings. Does a free drink after five include drink purchases that come with a combo meal? If not, customers will not be happy because they have purchased a drink from their perspective. Consumers will be happy with the program if it works for them. If those drink purchases do not count and that is what they normally purchase, they will not be happy and will find the program a waste for them.

Mohamed Amer
BrainTrust

It has always about how to drive incremental sales and increase repeat business. Getting something free is always good, but does it deliver and sustain business results as well as a more hybrid loyalty approach?

I suggest that free food is not sufficient and ought not become the dominant reward. McDonald’s loyalty program should encompass other means that enhance the brand’s relationship with their customers to build a more personalized experience and not be solely tied to transactions.

This is a big data opportunity for McDonald’s to get even more creative in their segment at the same time as when consumers are benefiting from falling or at least stabilizing gas prices.

Ross Ely
BrainTrust

McDonald’s should see strong results from its loyalty program. Its high number of transactions relative to other retailers will enable it to collect and analyze a large set of customer data. The insights from analyzing this data will help McDonald’s to better understand customer preferences and grow their business with personalized customer communication.

Mimicking the Starbucks loyalty program is a great place to start. McDonald’s can then evolve the program based on customer feedback and usage trends.

Ed Rosenbaum
BrainTrust

I am far from a fast food junkie and have little knowledge about the loyalty or frequency of customer visits. My guess is McDonald’s has a large following. Adding a loyalty program with a free anything can only be a benefit. If McDonald’s does this and it is anything close to successful watch out for more to join.

Shep Hyken
BrainTrust

Make it easy to use with a return on investment for the customer (in the way of perks and incentives) and it should be enjoyed and appreciated by the people who like loyalty programs.

To mimic Starbucks’ program — or any company’s program — is a mistake. That doesn’t mean there can’t be similar features. McDonald’s will make it their own. It needs to be uniquely McDonald’s. They are a leader in their industry and should work to create the program that others want to copy.

gordon arnold
Guest
4 months 12 days ago

A look at the purchase habits and likes of the Starbucks customer and the McDonald’s clientele might be very telling for the question we have here. Our friends at Starbucks spend $4 to $6 for a coffee concoction of some sort and will wait in the rain for it. McDonald’s customers are voicing dissatisfaction for the revolving dollar menu. The Starbucks customer will order over their smartphone simply because the app is in front of them and easy to use. The flip phone customer at McDonald’s may not have the access they need to carry out the use of this new app.

Bill Hanifin
BrainTrust

One of the strategic benefits from a loyalty program has been to create a tie-breaking effect among competitors battling in an environment with a high degree of parity. The McDonald’s product is differentiated from Dunkin’ Donuts and Starbucks, but there is an element of parity in that competitors each have some form of loyalty program, while McDonald’s has not gone beyond games, discounts and sweepstakes in its marketing efforts.

I believe that data will drive the decisions about what the right value proposition should be. I would not jump to quick conclusions about earning one free drink after purchasing five and definitely would not start planning by seeking to copy what Starbucks has done.

McDonald’s can create an effective loyalty strategy but needs to start with its own brand promise, business objectives and data in order to arrive at the best answers.

Karen McNeely
Guest

While Starbucks is most known for its coffee drinks, McDonald’s has a much broader selection. If they can truly use mass personalization for their program it could be one of the best ones out there. For me getting a free beverage or fries wouldn’t be an incentive because I generally don’t get those things when I go there. If I could get a free Egg McMuffin or salad that would be awesome, but I’m sure others would disagree, so something else might work better for them.

Dan Frechtling
BrainTrust

McDonald’s should not mimic Starbucks. Instead, it should cherry-pick.

If McDonald’s wishes to increase trips, which appears to be the strategy, it should not mimic Starbucks approach because it emphasizes spend rather than trips. After Starbucks switched the reward basis from visits to spend in late Feb, purchase intent dropped 9 points, according to YouGov.

If McDonalds wishes to spur signups, it should lower the reward threshold more in line with Caribou Coffee than Starbucks. Caribou gives participants a free drink just for joining, while Starbucks’ new program doesn’t provide a freebie until a customer spends $62.50, according to Money Magazine.

By being last, can learn from Starbucks, Caribou, Dunkin’ Donuts, Panera, Tim Hortons, and others. McDonald’s has the benefit of a larger menu than most, so driving trips can yield higher ticket.

Mark Price
BrainTrust

McDonald’s has a segment of their customer base that is highly loyal and frequent. This type of program should work well within that segment.

The structure of the program should be based on the company’s strategic goals — do they want to reinforce retention, increase trial of new products, acquire more new customers, increase upsell, etc.? While the answer could be considered “yes” to all of those options, the program cannot serve too many masters or will run off the rails. Specific objectives must be prioritized for the program to succeed.

The biggest benefit may be to establish an identified purchase relationship with their customers, permitting all sorts of personalized marketing outside of the loyalty program construct in general.

Craig Sundstrom
Guest

I don’t think it’s an issue with McD’s , per se, but how many “loyalty programs” can people handle before they stop paying attention to them? Sure, everything is automated, so all you really need to do is keep in mind the basic mantra “buy more!” but if you’re a regular customer, you already do that. Not to mention the ever increasing — and intrusive — info demands for “mass personalization.”

Mark Burr
Guest
4 months 12 days ago

As every day goes by, McD’s problem of customer retention gets worse. More choices, more healthy emphasis choices, better experiences are growing and arriving every single day to the market. Yet while they’re behind, the effort may stop the bleeding to some extent.

Their issues, however, will require far more than customer retention. They have aging facilities, an experience that is beyond old and requires relentless updating. That’s not to mention their menu and the reputation that the media hasn’t just thrust upon them, they have destroyed any possible reputation of a “good” choice for those seeking even a hint of something other than a artery clogging meal for adults and an obesity contributor for children.

B-b-b-but as the saying goes “You have to start somewhere.” Nevertheless, if their program doesn’t offer value and in combination to something to attract new customers or customers that have left them behind, it will be an expensive effort that produces nothing.

Fries are an interesting choice as an offer. That indicates they don’t understand the market or their biggest issue.

James Tenser
BrainTrust

I’d sooner compare McD’s proposed program with Subway than Starbucks.

Subway uses SMS/text messaging and offers appended to receipts as means to maintain contact with customers and persuade them to visit more often and buy more on each visit. It’s not a “loyalty” program, just a systematic way to keep the channels open and communicate personalized offers.

Importantly, it’s light weight, in proportion to the size of transactions and the RFM value of each shopper. Since each offer (text or on receipt) can be individually tracked, the trove of meta-data is extremely valuable and may be analyzed down to the store level.

Once again, we let the word “loyalty” interfere with clear analysis. No app is really needed here, just an opt-in to the Text Club.

Mike B
Guest
Mike B
4 months 11 days ago

So far their current app is resisted by the locations. I’ve tried using the app at locations shown on the app as participating and they refuse to accept it and have hidden the app scanners. This has happened in Granite Bay, CA and in the Reno, NV East Plumb locations. Also my neighborhood location has had issues processing the app for months but manually accepts the offers if you show your phone.

The offers are good low-cost token offers. Free fries with any purchase show up about once a month. Buy one get one free breakfast sandwiches, buy one get one free ice cream of some sort and buy one get one free McCafe are common. There are some burger-related offers that I don’t pay attention to since I don’t buy those items there.

At locations where the app works properly, the process is smooth and the discount is accurate.

McCafe gets a lot less credit than it deserves. It’s generally a good product at a far better price point than Starbucks.

wpDiscuz
Braintrust
"The McDonald’s product is differentiated from Dunkin’ Donuts and Starbucks, but there is an element of parity in that competitors each have some form of loyalty program, while McDonald’s has not gone beyond games, discounts and sweepstakes."
"If McDonald’s wishes to increase trips, which appears to be the strategy, it should not mimic Starbucks approach because it emphasizes spend rather than trips. After Starbucks switched the reward basis from visits to spend, purchase intent dropped 9 points."
"McDonald’s has a segment of their customer base that is highly loyal and frequent, so this type of program should work well. The structure of the program should be based on the company’s strategic goals — the program cannot serve too many masters or will run off the rails."

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