McDonald's new secret sauce - you want digital with that?

Profile picture for user slauchlan By Stuart Lauchlan April 27, 2017
Summary:
Digitally-enabled ordering and delivery is the future for the McDonald's Experience of the Future, says CEO Steve Easterbrook, including an expanding alliance with Uber.

Ronald McDonald Identity Crisis
It’s a long time since I’ve set foot inside a McDonald’s, despite being a burger fan. The rise of the self-styled gourmet burger chains has made the always-questionable allure of McDonald’s pale over the years.

For Ronald McDonald’s business to thrive in the future, the firm is increasingly looking to digital as its secret sauce for growth.

For example, McDonald’s is set to beat rival US fast-food chains to become the first to have mobile order-and-pay, with all 14,000 domestic branches offering the facility by the end of 2017. While Wendy’s is likely to follow relatively soon after, Burger King and Jack In The Box are still in test mode.

Meanwhile McDonald’s and Uber are expanding a pilot delivery alliance around the world. The burger giant has been testing delivery via the UberEats mobile app in about 200 restaurants in Florida since December. That’s now going to be expanded out to other US cities, as well as beginning trials in the likes of the UK and Australia.

Getting digital delivery right is important for McDonald’s as US customers in the main don’t want to go in branch. Around 70 percent of McDonald's domestic business is fulfilled via drive-thru, paticularly in urban areas. Providing that ‘food-to-go’ market with new channels to order is going to be critical, as CEO Steve Easterbook affirms:

There's a sense of urgency across the business as we take actions to retain existing customers, regain lapsed customers and convert casual customers to committed customers.

To address that urgency need, he identifies three “velocity accelerators” - digital, delivery and Experience of the Future (EOTF):

Our three velocity accelerators, digital, delivery and EOTF, will drive incremental, profitable growth. They create more satisfying and lasting relationships with customers, transforms convenience, expands our dayparts and collectively help us become a better McDonald's.

On digital, we are reshaping our interaction with customers, whether they eat in, take out or drive through. We'll bring mobile order and pay to 20,000 restaurants around the world by the end of this year. In the U.S. alone, mobile order and pay will be in 14,000 restaurants by the end of the year.

Whilst we're still in the early days in our pilot markets, we're moving aggressively, with multiple mobile order and pay tests already underway. We're already in 400-plus restaurants across the U.S., including Chicago, Monterey, Salinas, Spokane and Washington D.C. And globally, deployment is underway in markets including the UK, Australia and China.

EOTF

As for the McDonald’s restaurants themselves, they’re also getting a tech makeover as part of the pursuit of EOTF, most notably with the roll out of self-service ordering kiosks. These are seen as an important new element of the customer experience at McDonald’s:

Self-order kiosks have been in the French market [for some time], I remember going there when I was back in the UK seven or eight years ago. They're now seeing way over half of the in-restaurant transactions go through the self-order kiosk. And at peak hours, it's almost all the transactions because people move away from the hustle-bustle front counter.

So as we build out our digital platform, build out the functionality of the mobile app, introduce mobile order and pay, then that interacts with the kiosk, which then interacts with our kitchens. It's actually a pretty complex program that seem to be working through the last couple of years. But to me, out of the traps, it grows transactions. It grows the average check, but actually the beauty of this is it will keep on providing a platform of growth.

That said, Easterbrook concedes it will take time for the client base to get used to them:

It takes time for consumers' behaviors to change. So we need to get our hospitality programs very well established in a restaurant and customers have got to see a benefit. So initially, is it easier to order? Can it be easier to pay? Can you move away from the stress of the front counter?

He adds:

Convenience is about making our customers' lives easier by providing a more accessible and personalized experience with a welcoming crew in a modern and inviting environment. In Canada, customers have come to rely on the hospitality provided by our Guest Experience Leaders, who welcome them in the restaurants and offer to guide them through the kiosk ordering process. Customers appreciate ordering at their own pace and customizing their order just the way they like it. And since their introduction in Canada, kiosk usage has more than doubled year-on-year.

To ease the customer experience upgrade, McDonald’s has recruited a Global VP of Customer Relationship Management in the form of Bob Rupczybski, formerly in charge of data-driven marketing at Kraft. While there’s a big task ahead, it’s one that will deliver results, insists Easterbrook:

Think one year's time, two year's time, when we've got mobile order and pay. You can go in, they can scan their favorites. We'll have a better developed CRM program with some form of loyalty and reward that comes with that. You'll be able to call up your personal profile on the kiosk. You can redeem points or redeem offers, for example. So to me, the basic functionality already helps customers. They appreciate it. It's a much more modern and less stressful experience. But actually, there is incremental improvement year upon year upon year.

My take

The challenge here for McDonald’s will be to avoid the side-effect problems of mobile order and pay that have been seen at Starbucks, for example, where the use of smartphone ordering led to massive order fulfilment bottlenecks inside the physical stores. That said, the focus on digitally-enabled delivery options is a savvy one.

The other big question is whether the digital sheen is enough to mitigate against the instinctive bias of certain demographics, including me, about the quality of very low-priced fast food. In the age of the gourmet burger, I’m not convinced that a big touch screen kiosk and a loyalty card scheme is going to win me over.