Advertising Effectiveness Awards 1999 Advertising Federation of Australia Limited, Level 1, 201 Miller Street, North Sydney NSW 2060, PO Box 166 North Sydney NSW 2059 Australia Tel: +61 2 9957 3077 Fax: +61 2 9957 3952 Agency: DDB Sydney Client: McDonalds Refusing to Plateau: How Advertising Turned a Trend AroundINTRODUCTIONIn 1986 McDonalds started serving breakfast. Their aim was to make breakfast at McDonaldsappeal to everybody. By 1996, McDonalds had created a $220 million dollar breakfast fast foodmarket. The contribution advertising made was established in Effective Advertising 4.In 1997, sales continued to grow. However, underneath the impressive sales curve was evidencethat the growth in same store sales (comparative sales or like for like) was dropping significantly.Instead of a franchisee achieving sales growth at breakfast of 16% plus (as in 1994 and 1995), in1997, this same store sales growth was only 2.6%. McDonalds had created and succeeded inowning the breakfast part of the day. However, penetration had to plateau eventually. By mid–1997,there were signs that this might be the case. The growth of the business was in major decline.Sales growth was being generated by new store openings.In 1998, a change in creative direction breathed new life into the market, attracted new users toMcDonalds and grew same store sales.This is the story of how a decline in growth was turned around without resorting to the usual retailreaction of price discounting or changing the menu. See Figure 1.THE TASKThe role of the advertising in 1998 was to stop the decline in same store growth by persuading newpeople to visit McDonalds for breakfast.The marketing objective for 1998 was to increase the penetration of McDonalds breakfastcustomers as a proportion of Quick Service Restaurant (QSR) users from 11.8% to 14%. Theywanted to make breakfast appealing to even more people.THE CHALLENGESThere were a number of barriers obstructing those goals.Decline in the whole fast food categoryTo give the task some context, the reason the objectives were so ambitious, despite the salesgrowth decline trend, was that McDonalds needed growth. The QSR market (fast food chains) wasstarting to decline, thus putting considerable pressure on McDonalds. In 1998, QSRs fell 2%compared to 1997s penetration of people visiting.The cereal competition woke upThe breakfast cereal market is hugely powerful. Valued at $670m, it was worth protecting. It wasvery lucky that the breakfast cereal manufacturers had been unsuccessful with efforts to launch abreakfast product that could be eaten away from home.
In 1998, however, they launched new products with the recognition that people wanted analternative they could eat on the run – mostly breakfast bars. They supported those new brandswith a combined media spend of over $6 million. The key players were: 1. Uncle Tobys $1.53m 2. Pop Tarts (for kids) $0.5m plus (exact media spend was not available) 3. Up & Go $3.24mThese breakfast products had the advantage of both being less expensive than McDonalds and inmany cases having the image of being healthier.No new newsWhat is particularly important about the situation is that McDonalds had to attract people fromoutside their normal category. They already had 88% share of breakfast visits to QSRs. Faced withthe problem of sales stagnation, many retailers would have resorted either to offering a newproduct or, more often, offered discounts.In research groups, people asked why McDonalds couldnt serve more varied food – perhapscereal, fruit salad or muffins. It certainly would have made it easier to engage an audience with afresh story.It was decided that for a one–month promotion, a larger than normal size breakfast burger wouldbe offered–a variation on other big fill offers before, like McOmelette. These kinds of promotionalproducts had produced sales spikes in the past but did not bring new customers or sustained salesincreases.The effect of the health message explosionIts hard to quantify the amount of editorial (TV, newspaper and magazine) devoted to extolling thevirtues of a healthy diet, but Australians were certainly bombarded by it. Stories about the effectson children who dont get a proper breakfast before school, the effect on productivity, cholesterol,junk food, achieving balance, salt … the list goes on. What can be measured, however, is theresult it had on the way people view healthy eating.According to quantitative tracking provided by AMR: Quantum Harris,1 people are increasinglyinterested in health issues and many have taken action to change the way they eat as a result. Theneed for a healthy breakfast would be a real obstacle to persuading new customers. See Figure 2.The targets arent big Maccas fansThe diagram below (Figure 3) is taken from the qualitative research conducted in 1997.2 It showshow negatively non–users of McBreakfast felt about it.Not my kind of foodFurthermore, the food that McDonalds offered at breakfast wasnt what these people wantedeither. Among the objections people had was that the food was not healthy/nutritious enough. Butalso, for those looking for a treat, it wasnt the right kind of treat. Many times the same person hadboth complaints.THE CAMPAIGNA combination of qualitative research and DDBs experience and hypothesis led us to a solutionbased on real consumer insight.Instead of trying to keep selling something McDonalds breakfast rejectors had refused to buy forthe past ten years, we found out what they did want to buy and sold them that instead.They wanted things like sleep, admiration from their kids and time off from their kids! And theywere willing to pay for it.The strategy had three phases:
1. Focusing on reaching the lowest hanging fruit–targeting the easier targetsThe first change in strategy was to stop thinking about trying to make breakfast at McDonaldsappeal to everybody. Instead, we focused on the people who didnt find McBreakfast appealing andtargeted the easiest among them. We decided on four main targets. 2. Finding the problem or barrier that prevented them from coming to McBreakfastWe needed to understand their excuse for not going so we could bulldoze those excuses one byone. 3. Devising an argument that sidestepped the barrierThe following pages show the communication strategy for each target and the TV advertisementthat executed it. There were also radio commercials to reinforce the same message closer to thetime of decision–making.The key to the strategy was to acknowledge that the next group of people to convert to McDonaldswould come for reasons other than their love of the food and McDonalds ambience.TVC1: FLATMATESTarget: Young menConsumer insight: They dont cook and cant be bothered to buy proper breakfast food for home.Barrier to McBreakfast: Its OK to have McDonalds for lunch, but you need proper breakfast food inthe morning.Proposition to persuade target: Let us give you a hearty start to the day.TVC2: BROKEN DREAMTarget: Young working women 18–24Consumer insight: What they really want in the morning is to press the snooze button again.Barrier to McBreakfast: They dont like McDonalds. Its not healthy and its not a real treat either.Proposition to persuade target: Well let you have another ten minutes in bed without being late.Drive Thru!TVC 3: TUBE MANTarget: Dads (weekend)Consumer insight: Dads mostly work during the week and by the weekend they feel guilty theyhavent spent time with their kids.Barrier to McBreakfast: They dont think of McDonalds as fun time with their kids.Proposition to persuade target: Your kids will think youre a hero if you take them to Maccas forbrekkie.TVC 4: WEEKEND TEAMSTarget: Targeting mums to encourage dads (weekend)Consumer insight: By the weekend, Mums exhausted by the children and needs time to herself ortime for more chores.Barrier to McBreakfast: They dont love McDonalds food and feel uncomfortable feeding theirchildren McDonalds too frequently.Proposition to persuade target: McDonalds saves Mum the hassle of making breakfast on theweekends.Neither the media budget nor the strategy changed considerably from previous years. The vastmajority of expenditure was allocated to national television ($7m) and the remainder ($3m) to radioto remind people to go to McDonalds at breakfast drive time.THE RESULTSThe sales results exceeded all expectations.
Sales increased by a total of $12m across the same stores as the year before.Please note that all sales and Transaction Count data is on a same store or average store basis.This ensures that the effect of new store openings is neutralised.AVERAGE SALES INCREASEDThe campaign stopped the decline in same store sales growth. Better still, it reversed the decline.Average sales per store at breakfast, across all stores, increased by 4.5%: markedly improved from–1% in 1997 and 0.5% in 1996. Each McDonalds store made, on average, $20,700 more in sales in1998 than they had in 1997. Figure 4 shows average weekly sales and a polynomial trend line toshow the effect more clearly.Penetration target metBy June 1998, the target of increasing penetration of breakfast users from 11.8% to 14%3 wasalready met (six months ahead of time). The research that provided this information wasdiscontinued in June 1998, so it was not possible to determine what level was achieved by the endof the year.What is available, however, is the number of transactions (orders) to project whether this trendcontinued beyond June. By the end of 1998, 1.6 million or 4% more transactions were completed inthe same stores as in the full year of 1997. See Figure 5.New customer rate increasedThe rate of new people visiting grew significantly. Whereas there was around 8% growth perannum in the number of people who visited for breakfast in 1996 and 1997, a new 11.4% wereattracted in the first half of 1998.4 See Figure 6.The people invited actually cameA profile of the new people who visited for breakfast shows that in fact more of the people who wechose to target visited and they also increased the total number of visits (occasions) considerably. % increase of new users in % increase of new occasions target group in target group Young men 18–24 86% 75% Young women 18–24 15% 55% Fathers of young children 2% 60%For example, 15% more young women (aged 18–24) visited than in the same period in 1997. Theyalso increased their number of occasions to breakfast by 55%.In summary, by the end of 1998 McDonalds generated $12m more on a same–store basis. By June1998 82,000 new people came to McDonalds for breakfast, contributing an incremental 260,000visits.What caused the growth?Relationship between advertising recall and behaviourIn 1998, the change in advertising material (the creative execution, not the media) was the mostsignificant change. Moreover, the people who say they saw the breakfast advertising in 1998 have asignificantly more positive disposition and behaviour towards McDonalds.The numbers below for people (aged 15+) who recall seeing breakfast advertising are indexedagainst those who do not recall seeing the advertising.
NOT seen any McDonalds Seen McDonalds Breakfast Breakfast advertising advertising (n=1433) (n=1087) Positive predisposition to 124 100 McDonalds Average number of McDonalds 133 100 breakfasts in the last week Source: Dangar Research Quantitative Tracking (September 1998)Relationship between advertising recall and attitudeThe table above demonstrates that the advertising grew new users in both predisposition andbehaviour. However, what preceded this was an important change in attitude. Seen breakfast advertising NOT seen breakfast (n=1433) advertising (n=1087) Have good advertising 81 74 Its become part of my way 32 26 of life Are getting more popular 52 47 nowadays Are progressive and really up 64 57 with the times Has a real family feel to it 63 58 Feel comfortable eating there 53 47 on my ownThose respondents who had seen the advertising were most positive about McDonalds. But,critically, the two dimensions of its become part of my way of life and feel comfortable eatingthere on my own were higher than other McDonalds users. This is a direct reflection of thestrategy.Transaction counts increased consistently in 1998Figure 7 shows the average number of transaction counts (number of orders taken) each weekcompared to the corresponding week in the previous year. What is quite clear is that there werehigher transaction counts on almost every week in 1998 than 1997.A FEW FACTORS NEED TO BE CONSIDERED COMPARING THE WEEKS:SeasonalityIn both years, there are increases during the Easter and Christmas school holidays.Brand advertising
There are extremely high media weights to launch the new brand campaign for McDonalds startingin January. This may explain the increase in January (pre–breakfast campaign launch).OTHER EXPLANATORY FACTORSNumber of McDonalds outletsNew stores did open in 1998, 23 of them about halfway through the year. However, the number ofMcDonalds stores is now so high (650) that new stores add strain to existing stores to attract thesame number of people. For this reason, the fact that average and same store sales increased wasmade even remarkable.In addition, the new stores that opened were mostly smaller stores (with lower sales). These serveto lower the average as a rule.As a result, the increase in sales, transaction counts and penetration cited previously cannot beattributed to new store openings.Changes in productThe regular breakfast menu had not changed in ten years. There was one promotional burger asdiscussed previously. This was the Massive McMuffin (big breakfast burger) for one month in lateAugust. Although this promotion was successful, the sales growth started well before the promotionand as can be seen from the transaction counts v. TARPS chart (below), these promotional weekswere not as strong as weeks with regular breakfast brand advertising. See Figure 8.PriceThere were no changes to pricing in 1998. Also, the Value Meal had been available and advertisedfor many years at the same price of $3.25.Other promotional activityIn terms of non–advertising promotion, all things were approximately equal.Public relationsThere was no deliberate public relations activity and no substantial editorial about McDonaldsBreakfast.Local store activityThere may have been some small, ad hoc promotional work done by individual stores, but nonewas coordinated on a national or statewide basis. It was no heavier than in previous years.Promotional offers during the yearThere were two special offers in 1998: the Massive McMuffin (already discussed), and a Value MealDeal which included a bonus newspaper. Although deemed successful, these did not generatetransactions as high as months which used non–promotional breakfast brand advertising, as seen inFigure 8.Other advertisingIn 1998, McDonalds launched a new brand theme campaign Only McDonalds to replace MacTime–both created by DDB. It is possible that this brand advertising contributed to a strongerpredisposition towards McDonalds, which in turn increased peoples motivation to go to breakfastthere. However, it is unlikely to have had such rapid effect.More visits by the same customersFirst, the penetration chart proves that there were actually more people and the number of newpeople was higher than in 1996/97. Also, the average number of breakfast visits stayed constantthroughout 1997 and 1998.McCafe stores
McCafe represents such a small part of the overall business (both in sales and number of stores)that the effect is negligible. Its contribution is less than 0.9% in total and did not grow significantlyin 1998.GROWTH OF THE WHOLE McDONALDS BUSINESSLooking at total same store sales (again excluding new stores) non–breakfast sales increased by1.5% compared to 1997. Breakfast same store sales, however, grew by 5.2%.How the advertising workedThe advertising used in the years 1986–1996 was already very effective. It had clearlycommunicated the products you could buy at McDonalds at breakfast and had shown it to be anenjoyable experience. However, that formula had become less effective by 1997 in attracting amore resistant target audience.Quite simply, the new campaign stopped pushing what McDonalds serves and how quickly it isserved, and started selling what these reluctant consumers really wanted.It seduced them into watching the messages by using a hook. That hook was about making theirlives better. Then the solution was revealed to be McDonalds for breakfast.How effective was the advertising?Most importantly, the 1998 breakfast campaign was not an exercise in purely getting moreawareness or a change in attitudes. It caused a real behavioural change among Australians–gettingpeople who had refused to go to McDonalds for breakfast to start going.McDonalds breakfast sales had traditionally been driven by both new store openings andadvertising. By 1997 they were being driven almost entirely by new store openings, and were againin 1998. New store openings contributed to increases in • average sales per store by $20,700; • penetration of breakfast users from 11.8% to 14%.So, how can we measure the total effect excluding the new store effect? Rather than inflating thesales effect by looking at total sales (which will naturally grow with new store openings), when weuse comparative data on the stores that have been open for twelve months, these stores grew theirsales by $12,000,000, triggered by a change in creative strategy. (New store openings if anythingwould cannibalise the sales from existing stores.) 1997 1998 Same store breakfast sales $198m $210 Media investment for total $10.3m $10m campaign Sales: Media investment ratio 19.2 21.0Whats more, that increase was generated with no increase in media spend (in fact, slightly less).The real return on the advertising would be greater than this. This is because the advertisinginvestment has been fixed and is responsible for generating the base level of sales. With no changein creative strategy, the advertising would have generated at least $198m. Without this investmentit would have been considerably less. The incremental sales are accounted for by the change increative strategy.CONCLUSIONThis is a precedent case for using brand advertising to lift sales in a mature market.
Instead of resorting to price discounts and promotions to generate a quick hit, which does notalways create enduring sales growth, this case proves that advertising existing products can, infact, change behaviour.The key in this case was a shift in thinking to the way non–customers think. In understanding theirperspective–their preoccupation with making their lives better, not with our products–we could helpsolve their problems, thus becoming relevant.It proves that a change in communication strategy can drive sales to the tune of at least$12,000,000, in the same stores, even in a mature market.NOTES & EXHIBITS FIGURE 1: MCDONALD’S TOTAL BREAKFAST SALES INCREASE DESPITE DECLINING RATE OF SAME STORE GROWTH FIGURE 2: PERCENTAGE OF ADULTS WHO CLAIM TO BE ACTIVELY TAKING CARE OF THEIR HEALTH
FIGURE 3: IMAGERY OF MCDONALDS AT BREAKFAST AMONG NON–USERS FIGURE 4: AVERAGE SALES AT BREAKFAST 1995–98
FIGURE 5: SAME STORE BREAKFAST TRANSACTION COUNTSFIGURE 6: : PEOPLE WHO HAD BEEN TO MCDONALDS FOR BREAKFAST IN LAST 4 WEEKS FIGURE 7: AVERAGE TRANSACTION COUNTS AS BREAKFAST