Calif. McDonald's $.29-$.39 burger promo poised to spread nationally

Nation's Restaurant News, Feb 2, 1998 by Richard Martin

Los Angeles -- In McDonald's biggest discounting binge sine last year's aborted "Campaign 55," the chain began a promotion of 39-cent cheese-burgers on Sundays and 29-cent hamburgers on Wednesdays at 1,192 California outlets.

Debuting on the West Coast as the prelude to a possible nationwide rollout, the all-day discount campaign broke at the same time McDonald's marketing team was regrouping from a costly string of lackluster promotions and fighting to reverse prolonged sales softness.

Limited to 20 burgers per customer and available from 10:30 a.m. until closing on the designated days, the discounted items are being sold in McDonald's 530-unit Greater Los Angeles market as well as the chain's San Diego, Fresno, Sacramento, Santa Barbara and Bakersfield regions. Supported by broadcast and outdoor media, the promotion began Jan. 18 in the Los Angeles territory, including Orange, Riverside and San Bernardino counties, a week after breaking in Northern California and following the initial launch Dec. 27 in Fresno.

Tito Zamalloa, the chain's regional marketing supervisor for Los Angeles, said McDonald's regions nationwide are showing "growing interest" in adoption of the promotion. He said the Sunday-Wednesday discount concept, first tested in Miami in mid-1996 an extended to other Florida markets last June, now is poised for expansion to Albuquerque, N.M., and Colorado Springs, Colo.

Zamalloa said gains in Florida and the early results from California have "far exceeded our projections as far as sales and transactions." He would not divulge per-item margin comparisons with regularly priced burgers or per-store business increments but said "we have seen double-digit increases."

Nonetheless, a system wide rollout of the 29-cent/39-cent discounts may not happen through direct orders from McDonald's Corp., regardless of traffic gains or whether most operators outside California and Florida develop an appetite for the concept.

In the company's newly released earnings report for fiscal 1997, Jack Greenberg, chairman and chief executive of McDonald's USA, said 1998 marks the chain's shifting of "more of our promotional advertising to local markets to address specific competitive situations."

Although not always pegged to recurrent day-of-the-week slots, McDonald's regions nationwide selectively have been promoting a novel variety of low-priced lures, such as four-patty "quad" cheeseburgers for about $1.80 in Philadelphia, 89-cent Big Macs in San Diego and 88-cent sundaes on Sundays in Tampa, Fla.

Meanwhile, the chain is said to be taking unprecedented steps to revamp its national menu and brand identity.

In what would be a break from McDonald's tradition of marketing leadership by long-tenured veterans, Greenberg reportedly is assigning a major brand overhaul to recently recruited specialists. According to unconfirmed reports, two of Greenberg's hires last year -- marketing vice president Dave Baney, and ex-Burger King executive, and menu management vice president Tom Ryan, formerly of Long John Silver's -- are being asked to plot the food-and-image-focused tactics for boosting McDonald's taste appeal. Baney and Ryan report to senior domestic marketing vice president. Brad Ball, who himself was recruited to McDonald's just tow years ago from one of its ad agencies.

Greenberg, in the new earnings report, only touched on an overhaul by saying that the company had begun "a review of our core menu in an effort to improve our customers' overall experience."

Although McDonald's spokesman, Chuck Ebeling did not comment on any marketing realignment, he underscored that the chain's discounting tactics largely "will be manifested through our local markets" and that "national marketing going forward will be focused on the brand, less on pricing."

Nonetheless, the television, radio and outdoor ads for the new discounting in California were created by McDonald's national agency, DDB Needham Chicago, which took over the account fro Leo Burnett Co. in a highly publicized shift last summer. In the ads a man attempts to console his crying companion by asking, "Don't I take you to McDonald's" for the Sunday/Wednesday specials? She sobs back, "Today's Thursday."

Franchisee Regina Yin, co-owner of a nine-unit McDonald's group based in Vacaville, Calif., said traffic generated during the campaign's first two Sundays "was incredible; we couldn't keep up."

However, sharp criticism of the discounting from some franchisee reflects the breaking of ranks by McDonald's operators in recent years as marketing miscues has increased. Gerardo Perez, a one-unit franchisee in suburban Sacramento, said the Sunday-Wednesday promotion is "extreme, and it's silly and at some point it cheapens the brand."

San Diego consultant Dick Adams, a former McDonald's executive and franchisee who heads a group of dissident McDonald's franchisees called the Consortium, charged that the chain's latest discount effort is "a huge problem for franchisee." McDonald;s Corp., he said, "makes all their money on the top line, so they're always trying to drive sales at all costs, but it's the franchisees who pay the cost."