October 8, 2015

McDonald’s Breakfast: Not a Free Lunch for QSR Marketers

McDonald’s new breakfast policy is sure to inspire imitators among other fast food chains. But QSR brands shouldn’t just emulate what’s working for competitors; they should correlate consumer data to revenue to understand what customers want and how to change financial outcomes.

Even if you’re one of the few people immune to the charms of an Egg McMuffin, you’d have to have been living under a rock the last few weeks not to have heard that McDonald’s now serves breakfast all day.

Scores of commentators are already assessing the fast food chain’s chances at success or failure, but fewer people are discussing the ripple effects that the McDonald’s move will have on the wider QSR industry. After all, when McDonald’s revealed its intentions earlier this fall, rival White Castle announced its own all-day breakfast plans less than two weeks later.

A key issue isn’t whether breakfast provides a lift for McDonald’s or even White Castle, in other words. The issue is how fast food restaurants engage with the public and use consumer data to adapt to customer demands. The QSR industry mustn’t fall into a game of strategic pantomime or oneupmanship, with all-day breakfast at McDonald’s necessarily triggering all-day breakfast at competitors. Instead of looking at one another, fast food brands must look to consumer data to lead the way.

For McDonald’s, which has weathered one of the rockiest twelve months in the chain’s 60-year history, the move is a no-brainer. Breakfast hours have been a long-running sore spot for the company’s customers. Some readers will surely remember the 1999 film Big Daddy in which Adam Sandler haplessly attempts to console a young boy after they arrive at McDonald’s a few minutes too late for hot cakes and McMuffins. “Can someone get the kid a Happy Meal?!” an exasperated Sandler bellows, sliding into his typical man-child routine. Audiences no doubt nodded their heads, having experienced similar frustrations themselves. (FYI: If you haven't seen the movie, the below clip includes mildly NSFW language.)


McDonald’s isn’t serving all-day breakfast thanks to a 16-year old comedy headlined by a fading movie star, of course. But the scene demonstrates how long this consumer demand has been woven into the chain’s customer narrative. Indeed, when McDonald’s used to cease breakfast at 10:30 AM, it wasn’t because its corporate strategists were unaware of consumers’ desires. It was because of the political complications between the corporate brand and its franchisees, the latter of which have had to install new equipment and implement new workflows in order to make all-day breakfast work.

Technology has also crucially played a role, not only for McDonald’s but also for dynamics across the entire fast food industry. Not long ago, McDonald’s commanded enough market clout to dictate trends within its space; if McDonald’s sneezed, the rest of the QSR world got a cold. That’s still true to some extent, but technological disruption has changed the landscape. Thanks to social media, control of a brand’s reputation no longer rests with PR professionals, for example; instead it rests primarily with consumers, who can more easily rally around concerns that range from the health impacts of meals to the wages that fast food workers are paid.

Web-based delivery services are another disruptor. QSR brands covet business from high-spending, experience-seeking millennials, many of whom are increasingly drawn to urban areas. In places such as San Francisco or Manhattan, visiting a drive-through can take forty minutes round-trip. Using a service such as OrderAhead or DoorDash is somewhat more expensive but takes about the same amount of time and eliminates the stress of navigating metropolitan traffic. These services also level the playing field for the so-called “upscale” QSR restaurants such as Smash Burger, Five Guys and Chipotle, allowing consumers to quickly and easily get food from these establishments even though none of them offers drive-throughs or first-party delivery.

What does all of this mean? More than ever, fast food restaurants need to be innovative, agile and responsive to consumer wants. McDonald’s is embracing this new reality head-on. Its massive PR campaign for the new breakfast policy includes social media posts from consumers. In fact, the company sifted through breakfast-related tweets from as far back as 2006 so it could deliver personal, one-to-one messages to everyone who’s ever expressed a desire for an afternoon hash brown.

The restaurant’s implicit message to customers is “you asked and we have delivered.” Many of its upcoming plans, such as delivery services and a “design your own burger” option, tap a similar vein. If there were any ambiguity about McDonald’s strategy, McDonald’s USA CMO Deborah Wahl made the point explicit: “This idea came from our consumers. We said this really is the people’s launch.” (White Castle made similar statements when it announced its own breakfast plan.)

For other QSR brands, then, the goal shouldn’t be to simply match the McDonald’s breakfast policy if that policy proves successful. Rather, these brands need to treat social media as the world’s largest organic focus group. From Pizza Hut’s ill-fated Priazzo to Burger King’s giant omelette sandwich, fast food chains have a long history of throwing new ideas at the wall and seeing what sticks, often losing millions of dollars in the process. Frequently, this tactic involves mimicking a competitor, such as when Wendy’s launched the Frescata, a sandwich that attempted to appeal to Subway customers but that remained on the menu for only a year.

These old strategies won’t work in today’s environment. QSR brands won’t succeed through guesswork or by aping their competitors’ ideas. Instead, they must let consumer opinions lead the way. As any marketer who’s dealt with social data knows, around 80% of online statements aren’t helpful. But by correlating consumer posts with revenue, companies can identify the ideas that are most resonant with different groups and most impactful to sales.

One of Quantifind’s QSR clients wanted to attract more teenage customers, for example, but didn’t know how to do so. Did the brand need new food items? Was its advertising the problem? After analyzing social data and revenue, we concluded that parents were actually the issue; teenagers wanted the brand’s food, but mothers were less enthusiastic, which meant these moms often chose not to take their kids to the drive-through. By offering new coffee options that appealed to moms, the brand was able to not only increase its business among teenagers, but also to add parents to its customer base.

This sort of data-driven decision-making is essential in today’s world. Large brands always have several bets they could place. To choose among them, they need to know which options offer the most potential upside. If a chain offers all-day breakfast to match McDonald’s, will it actually gain new customers? Or will existing customers just shift their habits, buying breakfast items instead of something else and giving the chain no net gain? If new customers are gained, will the lift last for a few days, or will it be sustained? And will there be enough new customers to compensate for the equipment, R&D and advertising costs that the brand will incur? It takes a data-centric approach to answer these questions, and to be as customer-centric as the new landscape demands. Those brands that recognize this will be tomorrow’s competitors and market leaders; those that don’t will be tomorrow’s cautionary tales.