McDonald’s Digital Strategy, 10 Things You Need to Know
The digital economy, everyone wants in but some are doing better than others. While McDonald’s may seem like a traditional brand it has made great strides in modernizing its customer experience. From adding digital ordering kiosks in restaurants to creating one of the most widely used mobile apps in the retail sector many companies are taking cues from McDonald’s. If you are curious about what McDonald’s is doing to stay ahead of the competition then take a look at how McDonald’s is using its loyalty program as well as other digital initiatives to stay ahead of the competition.
1. Free stuff to lure customers in. In 2021 McDonald’s launched its first ever points based loyalty program in the United States called MyMcDonald’s Rewards. The loyalty program is fairly simple, customers receive 100 points for every dollar they spend. For as little as 1,500 points you can redeem your points for one of several menu items including a hash brown, cheeseburger or a McChicken. McDonald’s loyalty program is only available through its mobile app.
Since McDonald’s is keen to acquire more digital customers it runs promotions like offering a free 10 piece box of Chicken McNuggets for people who sign up for MyMcDonald’s Rewards. Loyalty program members also receive 1,500 points after their first order, which means it doesn’t take very much or very long before you get a free treat. “Our guests are some of the most loyal in the world, and we're pleased to offer them more reasons to visit us, again and again. This announcement marks another step in our digital ambition as we continue transforming the McDonald's experience on both sides of the counter, which began with the introduction of self-serve kiosks in 2015," said Jacques Mignault, former chief executive officer of McDonald's Canada speaking about the launch of MyMcDonald’s Rewards.
2. Rewards for your data. One of the primary benefits of McDonald’s loyalty program is that it allows McDonald’s to easily gather valuable first party customer data while at the same time receiving consent for the collection of that data. This is important since customer data is often collected by companies like Facebook in a manner that isn’t transparent. For example, many times our behaviour on the internet including what sites we are visiting is used by companies to send us more targeted ads. That is why when you look at a pair of pants on one site you see an ad for that very same pair of pants after you have moved on to new websites.
With that in mind Apple has made moves to make that type of tracking and targeting more difficult through privacy changes in iOs 14.5. With these changes it is now harder for companies like Facebook to accurately target and measure the effectiveness of their ads. By having a loyalty program retailers can get around those privacy changes by collecting data directly from their customers. Then if McDonald’s notices a customer only orders McDonald’s for lunch then it can send them an offer to entice them to order a breakfast meal. This type of data is like gold. It is completely specific to an individual customer based on their own purchase history and there are no privacy issues.
3. The more loyal the more valuable. Another benefit of having a loyalty program is that those customers tend to be more valuable. "Our loyalty customers are far more likely to return in the next 30 days compared to non-loyalty customers," said Joseph Erlinger, president of McDonald's USA. Not only do these customers make more frequent purchases their average order value tends to be higher. McDonald’s digital customers also report higher levels of customer satisfaction.
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4. More personalized customer interactions. One of the clear benefits of having more digital customers is it allows retailers to gather rich customer data. Then that data can be used to provide customers with more customized promotions. For example, 68% of American adults surveyed said they like when brands provide customized offers using data gained from their purchase history. Think about how many times while shopping on Amazon you bought an additional item because Amazon showed you a recommended item that was a perfect fit.
If your customers are making purchases in-store and you have no idea of who they are then it’s difficult to understand their needs in a deeper way. By growing its digital business McDonald’s has an opportunity to use the data it obtains to unlock hidden customer needs which over time translate into more sales.
With McDonald’s loyalty program all a customer has to do when they are ordering in store is have an employee scan a code in the McDonald’s app in the customer’s phone. The customer accumulates points and McDonald’s gets their data. "McDonald's is putting two halves of their whole objective together: engaging with Millennials and Gen Z with their celebrity campaigns, while rewiring the behaviour of their customer base toward a mobile-focused engagement experience," said Lauren Hockenson, a former product marketing manager at Sensor Tower.
5. Leveraging scale to lower delivery fees. As mobile ordering and food delivery picked up during the COVID-19 pandemic restaurants faced a conundrum. Do they partner with a food delivery company and ride the wave? Or do they wait it out so they can avoid the high commissions charged by food delivery companies. Not many restaurants have been able to sit on the sidelines hoping customers will order like they used to, primarily on premise.
Sensing that delivery might be the next big thing McDonald’s signed its first nationwide food delivery contract with Uber Eats before the pandemic began in 2017. McDonald’s has even called delivery “one of the largest growth engines of the McDonald’s business globally.” But like many retailers McDonald’s doesn’t like paying high commissions either. With this in mind McDonald’s updated its contracts with both Uber Eats and DoorDash in 2021. While many restaurants pay up to 30% in commissions when using the services of third party delivery companies McDonald’s was able to negotiate a 14% commission on orders from customers that do not have an Uber Eats Pass and a 16% commission for those that do have one.
For DoorDash McDonald’s negotiated an 11.6% commission on orders from customers that do not subscribe to DashPass and a 14.1% commission from subscribers. These have been called “sweetheart deals” as smaller restaurants do not have the same leverage. Reducing these fees is important for McDonald’s since demand for delivery is still strong.
McDonald’s also uses DoorDash’s and UberEats’ white label services which means that if a customer orders using the McDonald’s app it is delivered to them seamlessly using DoorDash’s or UberEats’ delivery network. That also allows McDonald’s to collect customer’s data while still using the services of third party delivery partners.
6. Points in exchange for more digital customers. If you think about it, you likely have far fewer retailer apps on your phone than the number of retailers you frequent. If digital is a key priority for your business then you have to find an incentive to get customers to download your app. A loyalty program has come to the forefront as a very effective way to get customers to engage in a brand’s digital channels. This is something Starbucks has long known. Starbucks launched its app in 2011 and added mobile ordering functionality in 2014. While you are excited to accumulate your stars from Starbucks’ loyalty program Starbucks is excited by getting a good view into your buying habits.
McDonald’s loyalty program is only available on its app, so if you want to collect MyMcdonald’s Rewards you have to download the McDonald’s app. Not only do you need to download the app you also need to provide your name, email address and postal code.
On an earnings call in 2021 Restaurant Brand’s CEO Joshua Kobza said this about its digital strategy: “we are deploying loyalty programs at Burger King and Popeyes as well, which will help to reinforce the already large and growing number of guests engaged on our digital platforms at those brands. Fundamentally, what this allows us to do is work very differently and much more efficiently with our marketing funnels across our businesses. Many of the members of our rewards or loyalty programs tend to be some of our most loyal fans, and we can now personalize the offers and messaging that they receive to improve their experience and offer suggestions for other dayparts or menu items that they might like to try. We have also leveraged these channels to communicate about purpose driven messages that are important to our guests…at little-to-no media cost.”
7. McDonald’s now has one of the largest retailer apps. The McDonald’s app has been widely successfully, boosted by marketing promotions that included collaborations with K-pop superstars BTS in 2021 as well as the launch of MyMcDonald’s Rewards. With 24 million downloads the McDonald’s app was the most downloaded QSR app in the United States in 2021, ahead of Starbucks and Domino’s whose apps were downloaded 12 million and 10 million times respectively.
8. Omni-channel works in the fast food sector too. As many retailers have learned a successful digital strategy is about giving customers the choice to receive their orders when and how they want to receive them. Sometimes that is by having it delivered and other times customers prefer to pick up their order themselves even if they have ordered it online. McDonald’s has adapted to this reality by offering many ways for a customer to pick up an online order including in store, at the drive thru and curbside. These sales, known as click-and-collect orders, were one of the breakout stars in the pandemic and are expected to reach nearly $125 billion this year.
Retailers like click-and-collect sales because they reduce delivery costs.
9. Reorganize internally to focus on digital. With the importance of digital to McDonald’s overall sales at the start of the COVID-19 pandemic in 2020 McDonald’s added a new team internally called digital customer engagement. The team has several responsibilities including digital ordering, personalization, payments, loyalty and delivery.
"For us to realize our digital potential, our customer, business and technology strategies must be well-aligned," said McDonald’s CEO Chris Kempczinski speaking about the team. "We must accelerate our focus on the digital experience by taking a more holistic approach that drives value from our existing customer-facing digital investments to better engage customers and drive profitable growth."
10. Digital initiatives are boosting growth. By October 2021 McDonald’s loyalty program already had more than 21 million active members in the United States while only being in operation for around three months. “We’re well on our way to building the world’s largest loyalty program,” said Kempczinski. “Loyalty is the single biggest driver of digital adoption, and MyMcDonald’s rewards has exceeded expectations in terms of enrollment and participation.” McDonald’s digital sales in the first nine months of 2021 (in its top six markets) were $13 billion or 20% of sales.