Digitizing the Arches - getting up close and personal with McDonald's customer loyalty ambitions

Stuart Lauchlan Profile picture for user slauchlan December 13, 2023
Summary:
McDonald's wants to be able to super-size its personalization capabilities. Here's how.

McDonald's

McDonald’s Digitizing the Arches strategy has a bold mission statement. As CEO Chris Kempczinski told investors last week: 

We are building one of the largest consumer platforms in the world that will bring together the best of our brand, physical and digital competitive advantages to accelerate growth in our loyalty program and drive valuable loyalty customers to visit more frequently.

The fast food chain’s loyalty program has been scaling significantly anyway, explains Joe Erlinger President of McDonald’s USA, increasing customer adoption of the firm’s mobile app in the process: 

Over the last three years, our active loyalty user base has grown from millions to tens of millions of active users across our top six markets alone. But we’ve grown our loyalty program well beyond our top six markets, to more than 50 of our markets around the world. With 150 million active users across those markets, we now have the largest loyalty program in the restaurant industry and one of the largest in the world in any industry. 

Loyalty system wide sales have more than tripled in the last three years to over $20 billion, he adds. But this is only the start: 

By keeping our customers at the heart of our digital strategy, by delivering value however and whenever they decide to order and enjoy their McDonald’s favorites, we expect to grow our active loyalty user base to 250 million by 2027. And by deepening our relationships with these customers, we’ll build further engagement and expect to more than double our annual loyalty sales to $45 billion.

Location, location

Erlinger argues that historically, the number of McDonald’s locations has been a competitive advantage, one that will be added to in the future by having data sit alongside those restaurant locations:

It will fuel a virtuous cycle of improvements to the customer experience…Loyalty provides us with the data to serve customers in a personalized and uniquely McDonald’s way. Even as we’re just starting to build out our personalization capabilities, we’re already seeing loyalty customers in the US visit with 15% greater frequency and in markets like the US and Canada [they] spend nearly twice as much on average as non-loyalty customers. 

So the plan now is to continue to build a digital ecosystem and enhance the ability to more deeply connect with customers throughout their McDonald’s journey, from personalized offers thru discovering the latest menu additions or providing loyalty members with access to exclusive gamified experiences or media content. 

Mobile tech comes into play here as well. Earlier this year McDonald’s launched Ready On Arrival or ROA in the US, which integrates geofencing technology into the mobile app. Erlinger explains: 

Geofencing notifies the restaurant when customers are approaching and prompts the crew to start preparing the order. It allows for more efficient and effective restaurant operations, getting our customers the food they love while reducing customer wait times. In fact, we’ve seen a 62 second reduction in wait times for customers that pick up via curbside or in the restaurant.

As a result of delivering hotter, fresher food to our customers, we’ve seen significantly higher customer satisfaction score in these transactions which we know in turn drives frequency. As we deploy ROA technology across our top six markets over the next 18 months, we expect continued growth of mobile ordering will drive loyalty adoption and order frequency and help deliver on [our] loyalty growth ambition.

Size matters

The size of the firm’s total loyalty base is 250 million, notes Morgan Flatley, Chief Global Marketing Officer and Head of New Business Ventures, a figure that includes those who have been active at least once in the last 12 months. This makes McDonald’s the largest loyalty or subscription program in the world:

We believe the passion our customers have for our brand is a differentiator as we continue to grow our loyalty program. Now when we look at our strengths across brand, physical presence in digital, it’s clear that the power of our competitive advantages go well beyond QSR (Quick Service Restaurants). We’re playing in the same space as the world’s largest brands across all industries.

This unlocks possibilities not only to bring more customers more often, but to engage with them in a McDonald’s universe that offers unique experiences, argues Flatley: 

In addition to earning and using points for food, imagine if we offered limited time subscriptions to music or video streaming apps, exclusive merch to create a McDonald’s themed birthday party or first access to limited edition sauces, that would bring in even more customers more often.

Now imagine if we leverage data and insights from those customers to further deepen our engagement with them. Today, we have over $20 billion in annual systemwide sales from loyalty customers. This means we know their go-to order, when they like to visit, what they buy full margin and the offers that trigger additional visits. 

Think of the possibilities when we grow loyalty system-wide sales to $45 billion or if we grow even further to $65 billion and the possibility when millions of loyalty customers are purchasing their quarter pounders with cheese through a digital wallet that is linked to loyalty and stored value. This would enable customers to seamlessly pay with points in cash and transfer loyalty points between family and friends, further deepening their engagement with McDonald’s. 

And there’s more benefit for McDonald’s own operating model, she adds: 

Not only will we be able to provide more personalized and convenient experiences that drive frequency, but we’d also be able to future-proof our marketing approach. We all know that a cookie-less marketing world is fast approaching. In this new world, we believe we are better equipped to reach our millions of customers through the multiple channels we own. 

We can feature the food they prefer and nudge them at the right time to place an order or add an additional item. And when we connect our first-party data to our paid media ecosystem, we can reach customers with the right message and the right offer at the right moment, creating much, much greater impact. This is a tremendous competitive advantage that will increase the power of the billions of dollars we invest in paid media.

Flatley concludes: 

Beyond deepening how we’ll personalize the experience with our customers, we’re also exploring what it could look like to leverage our massive customer engine to build our brand and equities across our restaurant estate and our digital channels in compelling new ways that will also grow the business. As we look towards the future, we continue to visualize different ways to deepen our engagement with customers, and I’ll tell you, the possibilities are endless. 

My take

Bold ambitions from an organization that has made great leaps and bounds in adapting its business model to take advantage of digital tech. 

 

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