McDonald's has successfully grown its brand through strategic extensions. It analyzes cultural differences across markets to develop new products like McCafe and McTreat. While extensions can confuse or dilute the brand if not properly evaluated, McDonald's extensions have strengthened its brand image and financial performance by catering to consumer preferences and expanding into new categories. Successful extensions depend on maintaining strong brand associations that fit the new product.
4. About McDonald’s
McDonald's was started as a drive-in restaurant by two brothers,
Richard and Maurice McDonald in California, US in 1937.
The business, which was generating $200,000 per annum in the 1940s ,
got a further boost with the emergence of a revolutionary concept
called 'self-service.
Speed, service and cleanliness became the critical success factors of
the business.
By mid- 1950s, the restaurant's revenues had reached $350,000.
Today it is the world's largest chain of fast food restaurants
Today it serves around 68 million customers daily in 119 countries
across 36,538 outlets
5. Timeline
1937 – Drive-thur restaurant – The Airdome on route 66, California
1940 – Renamed as McDonald’s
1943 – Ronald McDonald character was created
1961 – Rights sold to Ray Kroc for $2.7 million
1962 – First McD’s with seating opened in Denver
1963 – 1 billion burgers sold with 500 total restaurants
1971 – McDonald’s expand globally
1979 – Happy meal was introduced
1997 – McFlurry was invented
2003 – The iconic I’m Lovin’ it campaign
2015 – Steve Easterbrook become CEO; announced widespread reform plan
6. McD’s Indian Timeline
1996
1st McDonald’s
opened in
Delhi, India.
1st McD in the world to
not serve beef and
pork based products
1997
1st Drive -Thru
restaurant at
Noida.
1st disabled friendly
store at Noida.
2000
1st highway
McD at
Mathura
2004
20062003
I’m lovin’it
worldwide
campaign
2008
1st 24hrs
McD
2012
McEgg
2013
McBreakfas
t
McDelivery
100th McD
restaurant
opened
13. McDonald's Way
To overcome these, the company has employed a
number of different growth strategies that can be
classified using the Ansoff’s growth share matrix
Company extended its offering by leveraging its
brand
Introduced new products based on local culture
14. Brand Extensions – Advantages
Facilitate New Product
acceptance
Improve brand image
Reduce risk perceived by
the customers
Increase efficiency of
promotional expenditures
Avoid cost of developing a
new brand
Permit consumer variety-
seeking
Feedback benefits to the parent
brand and company
Clarify brand meaning
Enhance the parent brand
image
Bring new customers into
the brand franchise and
increase market coverage
Revitalize the brand
Permit subsequent
extensions
15. Brand Extensions – Disadvantages
Can confuse or frustrate
consumers
Can fail and hurt parent
brand image
Can succeed but
diminish identification
with any one category
Can dilute brand
meaning
Can encourage retailer
resistance
Can succeed but
cannibalize sales of
parent brand
Can succeed but hurt
the image of parent
brand
Can cause the company
to forgo the chances to
develop a new brand
17. Consumer Based Brand Equity Model
• Rewards/Indulges me
• Let’s me be myself
McDonalds:
Connections across segments
• Sets the pace
• Reflects my own
style/personality
• Convenient locations
• Easy dining
• Affordability
19. Conclusion
Successful
brand extension
occurs when the
parent brand is
seen having
favorable
associations and
there is a
perception of
fit between the
parent brand
and the
extension
product
A brand that is
seen as a
prototypical of
a product
category can be
difficult to
extend outside
the category
An unsuccessful
extension does
not prevent a
firm from
backtracking
and introducing
a more similar
product.
Cultural
differences
across markets
can influence
extension
success
20. Tips
• Brand-attribute associations can both help and hurt an extension. It is
important to understand the obvious and subtle associations and their
potential to be transferred to the extension.
• Perceived brand quality is important to an extension. It pays to develop and
maintain a quality reputation, but only if there is a basis of fit with the
extension. Even a high-quality brand name cannot be extended everywhere.
• Placing a strong name on a trivial product class, even if it fits (i.e., Heineken
popcorn), is risky. Customers may feel it is incongruous, overpriced, or both.
• Two dimensions of fit that work are the perceived ability to make the product
extension and the perceived product class complementarity.
21. Summary
Brand extension occur when a firm leverages an established brand name to introduce a
new product
The extension’s ability to establish its own brand equity depends on the salience of
consumers’ associations with the parent brand in the extension context and the
favorability and uniqueness of any associations they infer
To evaluate extension opportunities:
Define actual and desired consumer knowledge about the brand
Identify possible extension candidates
Evaluate the potential of extension candidates
Design marketing programs to launch extensions
Evaluate extensions success and effects on parent brand equity