Tuesday, October 27, 2009

Betting McDonald’s Brand is Recession-Proof despite The Wall Street Journal.

On Thursday, McDonald’s got zinged by Julie Jargon writing in The Wall Street Journal. While admitting that “The recession helped McDonald’s Corp. more than other restaurant chains as consumers traded down to fast food,” the reporter also noted:

Lately, though, the company's same-store sales growth has begun to slow, leading some to wonder whether investment opportunity is shifting to the casual-dining sector…. If US unemployment continues to rise – as it did last month, to 9.8% – it could hamper any broader industry recovery and hurt McDonald’s results in the US, where the company gets most of its profit.

Now I have to say, first, that Jargon’s report is much more balanced than the excerpt implies. But second, the article knocks the company in front of a particular group of McDonald’s stakeholders that may have little interest in the brand but lots in the share price. Jargon raises a question where none really has existed.

I am not a shareholder. I’m not following the charts and the graphs. But I do think that the McDonald’s brand is extraordinarily strong. Unlike the US manufacturers of cars, consumers still love this brand and keep buying its products: It is America.

With McDonald’s, I believe that unique personality that no competitor can claim is the reputation of America’s Restaurant. How do we capitalize on that reputation? By relating McDonald’s to our lifestyle – our own human experience.

Jack Smith, who would retire as Group President and Deputy Chief Creative Officer of Leo Burnett, McDonald’s long-time ad agency, said those words in April, 1986, to the company’s franchisees. He said in the same speech:

Reputation advertising is the kind that works very hard on the…long-term sales and top of mind. You (McDonald’s) are America’s Restaurant and nobody’s going to take that away from you.

Over this past quarter-century or so, McDonald’s has, like the rest of us, suffered many slings and arrows, although I can’t recall personally suing the company for clumsily spilling apparently hot coffee over myself. It’s been criticized repeatedly for being too large. Too unresponsive. Too exploitive (of beef, grass lands, workers, plastics, paper products) and too liberal and too conservative. It has been accused, all by itself, of causing Americans to be fat.

Through all this, McDonald’s has hardly ever lost sight of the fact that it is, de facto, America’s Restaurant. That’s how the company behaves. That’s how the company responds to economic crises. That’s how its corporate behavior appears in radio and TV commercials, billboard, print ads, websites, promotions – well, you name it.

Leo Burnett’s Smith spoke 23 years ago about TV commercials that now appear to be old-fashioned. Yet McDonald’s keeps to the same vivid brand theme. And if it’s the World’s Restaurant now, instead of just America’s, I’m lovin’ it. It’s a fine long-term brand ROI.

Thanks to Rob Schoenbeck for the timely sharing of Jack Smith’s 1986 speech.


Susan Kirkland said...

This is a case of "the nail that sticks out gets pounded". McDonald's is an American icon, and that warrants both good and bad attention. It is a Goliath than many Davids seek to gain fame from by causing its demise. What Jack Smith and his creative team built up in equity through identity development has served his client well. That equity is the intangible value we create, the very same that is so hard to explain and justify to a client when the bill comes.

McDonald's is high traffic; both the topic and the place. WSJ only had to mention it to cause that high interest to turn its attention to WSJ thus generating traffic it might not otherwise get. The WSJ is in the same financial soup as other print media like the recently deceased Gourmet Magazine. The rats on a sinking ship are grasping for life lines.

Susan said...

By the way, am I the only one who noticed how slim Ronald McDonald has become? First he was spawned as a roly-poly cuddly clown; now he's more like ballet dancer wear really ridiculously loose clothes. My, we are susceptible to peer pressure.

Richard Laurence Baron said...

Two Susans in one post - perhaps a new record. Thanks, both of you, for the comments.

Becci Himes said...

When McDonald's ditches the Happy Meal, then the stockholders can worry. :-)