Effective Brand Building: A Case Study of McDonald’s Corporation

Student ID: 282826 Supervisor: Jan Friis Bachelor Thesis Effective Brand Building A Case Study of McDonald’s Corporation Jaroslaw Sliwka Aarhus School of Business Aarhus University 2010 Abstract The changing world has encouraged big companies to create more personal connection with customers In addition, the constant sustaining of this relationship is required The concept which is used by the companies and prove to be successful is brand building Even though companies establish the brand, not all of them are using it properly and make a good use of it Maximum utility and using all aspects of the brand is the key to success In order to that, the knowledge about the brand is necessary Thesis will present how to effectively build a strong brand by taking theoretical and practical perspective At the beginning reader will be provided with various concepts in the field of branding After that, the case of McDonald’s Corporation will be studied Analysis of McDonald’s brand building process will help in understanding how this extraordinary brand was created In the theoretical part there will be five main issues brought up First various concepts of what a brand is and what are the function of the brand will be described After gaining knowledge what a brand is, different approaches how to build a brand are presented After that the idea of brand equity and valuable functions it perform of the brand is explained The process of creation of brand equity is possible thanks to brand equity drivers Different kind of drivers and function they carry out for brand equity are described At the end of this chapter, after knowing the basic element of the brand, all is summarized by showing various models useful in assessing brand and its equity All theories are useful in assessing and describing effective brand building process The second part of the thesis focuses on McDonald’s Analysis starts with brief presentation of some essential to the case facts After that brand equity drivers of McDonald’s are described one by one, together with the function they perform for brand equity Then the overview of McDonald’s struggle with the brand is presented in chronological order Both of this sections show, that McDonald’s is a successful company thanks to proper brand management and constant control over its image By implementing various elements company can be safe that even if one of them fail, there are others to compensate for it Last section of practical use of branding knowledge present McDonald’s on Brand Asset Valuator Model and the financial value of the brand Even though McDonald’s has a minor loss of brand equity values it stand for towards competition, the financial result are many times better then the ones of competitors After this summary the future of McDonald’s is speculated Thesis shows it is important for companies to have a well thought our branding strategy and knowledge of brand building processes Knowing role the brand performs and the process of brand building allow the company to control how it is assessed in consumers’ minds Careful studying McDonald’s brand building process shows that the company knows how to deal with its brand and proper brand management is their competitive advantage Table of Contents 1.Introduction Problem Statement Content Method Delimitations and Assumptions 2.Theoretical background of brand building .7 2.1.The Brand 2.1.1.What is the brand .9 2.1.2.Role of the brand 2.1.3.Extend of branding 11 2.2.Brand building 12 2.2.1.Brand Building Theories 12 2.2.2.What is brand building for? 17 2.3.Brand Equity .17 2.3.1.What is brand equity? 18 2.3.2.Brand equity theory (elements of brand equity and their function) .19 2.3.3.Brand equity drivers (building brand equity) 21 2.4 Brand life cycle, expansion and position on the market 28 2.4.1.Product/Brand life cycle 28 2.4.2.Brand Growth Direction Matrix .30 2.4.3.Brand Asset Valuator 32 3.McDonald’s strategy for building a successful brand 35 3.1 Historical background of McDonald’s Corporation 36 3.2.McDonald’s Brand Equity drivers 37 3.2.1.McDonald’s Brand Elements 38 3.2.2.McDonald’s marketing activities related to brand building 40 3.3 Historical developments in McDonald’s brand building 45 3.4 Perspectives for McDonald’s 48 4.Conclusion 53 Bibliography 54 Wright, Owen (2007) McCafe: The McDonald's co-branding experience Journal of Brand Management 14, 442 57 Introduction The world has changed thoroughly in last few decades, especially because of the impact of globalization Frequent migration of individuals, the tremendous acceleration of information exchanges as well as the enhanced geographical expansion and trade of goods and services, have transformed the economic and social environment in many ways Doing business is not the same as forty, fifty years ago Companies have to adapt to the changing world in order to survive or keep the position on the market These changes are especially profound for fast-food sector Looking at the market leader provides good understanding of this process And where should we look for this leader if not in the United States, the market where fast-food become part of national culture There are many outstanding fast-food providers in the USA, but one of them is beyond the competition, McDonald’s Corporation (McDonald’s) It is difficult to find a person who will not know basic information about the Golden Arches But how it is possible? What happened, that children when hear this magic word, instantly know what stands behind it? The interesting problem of McDonald’s brand will be researched at in this thesis Problem Statement The main goals of the thesis are to explain what is a brand, and by applying this knowledge to McDonald’s Corporation, the answer to the question why has McDonald’s been a successful brand, will ne given The goal is also to describe brand building strategy in order to get understanding why having a strong brand is important for the company The paper is written from marketing perspective Market of fast-food is changing together with the world, and despite many attacks McDonald’s was able to come out of the various situations unharmed This was possible because of the strong brand it has Using the case of McDonald’s the thesis describes what a strong brand is What is the role of the brand? How does the process of brand building looks like? What is brand equity and what are brand equity elements? The thesis focuses on getting fair view of how to build and keep the strong brand alive, and how to create, maintain and defend its position in consumer minds Content The thesis is divided into two chapters The first one contains the theoretical background about brand building At the beginning the general idea is presented, and as text proceeds, more details about brand building are introduced The first chapter starts by explaining the idea of the brand and its role Next part in about the process of building the brand Different theories are presented in order to show there are many ways of describing brand building process After that some theories about brand equity, which differ in categories are described Brand equity drivers together with their role and how to manage them properly is the theme of another subsection The last part of the chapter shows different models which are helpful in assessing stage the brand is currently in, and position it occupies in consumer minds Second chapter is about brand building done by McDonald’s First subsection is a brief history and essential fact which help is further analysis of the brand Analysis of the brand starts with description of McDonald’s brand equity drivers and functions they perform After that the process of building McDonald’s brand is explained by focusing on problems the Golden Arches faced throughout the years of existence Applying knowledge gained in previous sections and comparing it with the models used in describing the brand is the theme of next part Current position of McDonald’s brand and it’s performance is estimated At the end of the practical part of the thesis future of the brand, McDonald’s has build throughout the years, is briefly assessed Method Literature about the brand and process of building it is very broad There are many theories in this field Theories presented in this paper and way of doing analysis are believed to provide a fair view on the process of building successful brand The thesis does not use all possible theories, that is why conclusion may be concentrated only around approaches presented However the aim of the thesis was to provide theoretical background for further studies, which will collectively supplement each other and make up whole entity Although there are numerous sources on brand building theory, the case studies for specific companies are rather rare There are not many articles discussing McDonald’s as a brand Even those articles focus mainly on financial aspect of the brand This situation encouraged more detailed research related to brand building theory and its application to McDonald’s Corporation Delimitations and Assumptions Theories that are used for the discussion of McDonald’s case are commonly used and mentioned in literature when the concept of the brand is brought up Even though they have some flaws and they sometimes are criticized, they provide a good understanding of how to build a successful brand The thesis will not focus on criticizing individual theories, but on combining them in one entity in order to obtain a fair method for description and analysis of the chosen brand, which in case of this paper is McDonald’s Throughout the thesis some theories are limited by focusing on case relevant approach Since the marketer approach was chosen in writing the thesis, the financial aspect of the brand is limited to the minimum The practical part, which is applying the theory to the case, is limited only to the McDonald’s in the United States If McDonald’s international activities were taken into consideration the conclusion might be slightly different, however since this subject is too broad, it is limited to the national market of the company Even though the general idea of McDonald’s brand is the same throughout the world, brand operations in specific countries differ according to the consumers That is why, in order to provide a fair understanding of building a brand, the deep analysis of national market is done What is more, since building a successful brand is more about developing relationship with customers by using brand building methods by the company, the influence of competition on this process is omitted Theoretical background of brand building The process of building a strong brand and gaining competitive advantage is not an invention, that at some point of time was made It was the process that throughout the years was growing in importance and along with the scope of branding Nowadays brand building is the process that every company has to take into consideration When looking at market leaders like Google, Nike or Coca-Cola we notice not only the name of the company but also the whole idea behind it This chapter will focus on a brand as crucial element of connecting a company with its customers At the beginning the concept of the brand will be explained, together with its role and implications Then the idea of brand building and functions it performs will be explained together with steps vital to the creation of significant brand equity After that the great focus will be placed on brand equity First different theories will be presented, secondly three main sets of drivers that help in creating brand equity will be described and at the end factors that influence those drivers The next thing that chapter will focus on is the life cycle of the brand 2.1.The Brand There are many definitions of what a brand is There are as well many origins of the word brand But when did it get the meaning it has now? Originally brand was “a mark burned on the hide of an animal to identify its owner, or on the person of a convicted criminal to warn the public of theirs character”(Black 2003: 38) Mark Ritson writes that “the origin of the term brand comes from brandr, the Norse word for fire It means to burn the mark of the producer onto the product that they made.” (Ritson 2006: 17) It is not the time to discuss which meaning was the first and wonder which one is more important The fact is that both interpretations are relevant Even these days, in the era of globalization, there are different definitions of a brand Everything depends on the perspective we are looking from In the past the owners of animals used the word brand which meant for them claiming their property and in case of theft, easy identification For producers of tools the same word meant marking the products with logo of the producer so if there was a need to complain, repair or suggest buying the product to third party the manufacturer could be easily traced For the judiciary branch word brand meant to mark a criminal and inform society of his past and what behaviour could be expected There were many functions which brand had in the past, and so it is nowadays The first chapter includes a brief discussion of brand building theory After explanation of the idea of the brand, theories of brand equity and brand equity drivers are introduced The chapter includes also an assessment of the position of the brand in consumer minds and life cycle the brand follows 2.1.1 What is the brand The definition of what a brand is depends on how deep and from what perspective it is described The Oxford Dictionary of Economics describes brand as “a name used to identify the maker or distributor of a good” For the economists this simplified explanation is enough to understand what a brand is and it is sufficient for the perspective they look at a company The American Marketing Association defines brand as “a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors”(Kotler 2006: 276) From the marketing perspective brand consists of some specific elements and carries out some function From the perspective of the branding consultancy - Interbrand – brand is “a mixture of tangible and intangible attributes symbolised in a trademark, which, if properly managed, creates influence and generates value” (Interbrand 2007: 4) As it could be expected, consultancy firm is focused more on output, when explaining what a brand is A brand is thus a dimension that differentiates products or services from products and services of the competition which are designed to satisfy the same needs This dimension may contain differences that communicate what brand represents or may be related to the product or service performance This is the definition that will be used in the thesis 2.1.2 Role of the brand In the past the idea of branding was used mostly in terms of marking property or people The function was to inform about the ownership, assign workmanship to the producer or signal the reputation of the individual In today’s world many diversified products or services are branded But why companies decide to brand them? Is it because of the pressure the competitors put on branding and because everybody it? What is the reason of branding and what is the purpose? We simply may say because there are valuable functions which brand performs for a company as well as for customers This chapter will explain main functions of branding by dividing it into two destination groups For contractors the three important roles will be presented, and after that the implications for the consumers and benefits of branding will be explained The brand plays significant role in a performance of a company From the marketer perspective the main advantages of branding are legal protection, identity and loyalty The first role is legal protection Having a brand helps in protecting the unique features or quality of the product, process or any other aspect of the company Kotler and Keller explain how each type of intellectual property rights can be used, by distinguishing into parts, “the brand name can be protected through registered trademarks; manufacturing process can be protected through patents; and packaging can be protected through copyrights and proprietary designs”(Kotler 2006: 277) Legal protection has many implications It ensures that no one beside the company will have the benefits and it guarantees that money can be safely invested in brand building process Large amounts of money spend on advertising campaigns prove a success only if the company can reap benefits from them Identity is the second vital role the individual brand performs for a company The important feature of having a brand is being identified by consumers Having identity allows customers to differentiate the company from the competition It helps them assign past experiences, like the consequences of using the product, to specific manufacturer or distributor What is more, by using brand building the consumer evaluation process of identical items may be influenced by brand awareness For a company having identity means having image which can be managed Even though once it is established it is difficult to change, it is worth an effort since consumers often perceive image as representation of quality and performance Image together with reputation are important issue in brand building process Another function that brand performs is loyalty Brands signal a certain level of quality so that satisfied buyers can easily choose the product again.(Erdem 1998) The certain level of satisfaction that is signalled by a brand like quality has major impact on loyalty Repeatable choosing of the same product has advantages for both a seller and a buyer Brand loyalty assures also “the tendency for consumers to prefer familiar names”(Black 2003: 38) Having certain number of customers helps sellers to plan the investment and development of the company It is a predisposition that every marketer wishes to achieve In other words having loyal customers results in better earnings, which allow to invest money in brand building and in result having a strong brand and better product behind it On the other hand brand performs valuable functions also for consumers According to Kapferer there are eight functions that create value in the eyes of consumers (Table 1) 10 McDonald’s is also good at branding its food ”McDonald’s has employed branding of the Big Mac to deliver competitive advantage that is sustainable”(Lynch, 2009) The experience attached to eating each single item makes positive brand evaluation There are items like Filet-O-Fish, Big Mac, Happy Meal, McChicken or Chicken McNuggets that were able to stay on a market for decades This could be done only by successful branding and proper strategy Products recipes are refined all the time, in order to match consumers’ taste Adjusting it to changing market, and adapting the whole offer to the changing world by adding items like healthy food (salads and apples), offering the breakfast menu, or simply adding new items are strategies that help in keeping customers active and interested in a brand The knowledge that McDonald’s is a modern company which does not hesitate to make changes stays in our consciousness The expansions made in the past like McDrive offering take-away without getting out of the car, or more recent, like expanding coffee offer by introducing McCafe or introduction of wireless internet in every restaurant is what keeps satisfaction and loyalty on high levels Such a state of brand awareness is what is necessary to build strong brand The unique experience offered in McDonald’s is created also by packaging Every item with brand elements on it reminds us constantly what is the company that satisfies our needs The attitude is created not only by eating but also through the process of unwrapping and cleaning after oneself what gives a semblance of home atmosphere What brand offers, does not include the home atmosphere, however the possibility to clean after oneself influences customers minds, by making them feel that they have some influence on the company McDonald’s is building it’s brand by constant evaluation on current trends in tastes, health and food trends, customer interests and technologies What is more, the motto introduced by Ray Kroc in the early years of McDonald’s business activity can be seen as an important part of the company nowadays The vision of McDonald’s is “to be the world's best quick service restaurant experience Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile." Such constancy regarding way of doing business and serving customers is working well on how the brand is perceived Having in mind that all four factors are constant, whenever and wherever we go to one of McDonald’s restaurants, keeps satisfaction on high level If customer is not aware that quality, service, cleanliness and values are the core concept of the company he does not notice them or even if he notices it does not make him feel positive about it However if customer expects them, and the expectations are met, he believes that the value received for the money is making him feel he made a good choice 43 Brand image is one of the most crucial elements for McDonald’s Throughout the years image of the brand have changed many times It is not something unexpected, since the world is changing, influencing and causing changes on many fields The important for McDonald’s was to identify these changes on time, adjust performance of the company, and communicate what was done All new products, special offers, extensions or changes in doing business are communicated in various media in order to keep customers well informed The proper understanding of what brand stands for is a key to successful brand building However McDonald’s had also problems with its brand image The company was criticized for highcalorie, high-saturated-fat menu Items like milk shake or Big Mac, the icons, were disapproved by some customers There weren’t many of them, but they influenced the overall brand image McDonald’s started looking for solution When people started being more interested in healthy food, McDonald’s in order to get ahead of competition, used this information “In the years 2002-04 McDonald’s responded by launching new salad main meals and fruit ranges to all it stores”(Lynch, 2009) Heavy promotion aimed at healthconscious target group worked and company in no longer perceived as serving unhealthy food The last activity that influences brand equity of Golden Arches is internal branding McDonald’s from the very beginning understood how important internal brand management was, and recognized the competitive advantages it offered In 1961 Hamburger University was created which aimed at training franchisees However as McDonald’s started seeing the rising opportunities it started training of restaurant managers, middle managers and executives People who attended to Hamburger University were thought about many aspects that concern McDonald’s, and one of them was brand and the importance of communication it to employees McDonald’s is not only performing consumer researches, positioning, identification of the brand and making marketing campaigns, but also it also makes sure they catch employees attention and imagination Golden Arches finds it extremely important for employees to know what is the brand McDonald’s, what are the core values it presents This is connected to the fact that “By 2000, one out of eight Americans had, at some time in their life, worked for this company”(Botterill, 2007) One aspect of such a great number of people been employed in McDonald’s is, that they have to convince them, that all the changes in brand image are beneficial not only for the organization, but also for them McDonald’s helps them in understanding what is their role in the company and the unique function they perform Thanks to this clients are treated well, customers trust in what they say The sayings “Would 44 you like fries with that?” and “Would you like to Supersize that?” are seen by customers as an act of caring about them McDonald’s want employees to understand how good it is to work for McDonald’s and how important are they for building brand image The aim of this is to keep them in a company for a long time This approach resulted from way McDonald’s used to have in the past The term McJob, which is used instead of a low-paying, low-prestige, nonchallenging with minimal benefits and opportunities for promotion job, is really harmful for the brand image However McDonald’s found a solution to that problem It started campaign It’s Not A McJob, It’s A McCalling The aim of it was to show the prospects of working for Golden Arches Together with term McProspects company encouraged the positive evaluation of working for McDonald’s The company clearly understands the benefits rising from internal branding and knows how to use it To show even greater concern about its employees and their needs, McDonald’s have started a blog called Station M It is used “exclusively for the restaurants to communicate with each other”(Smith 2009) It can be seen that company wants the employees to feel special It is understandable why they started using such a techniques to build morale and thus create positive brand associations Since one out of eight Americans had worked for McDonald’s, it is necessary to keep them satisfied The possibility to keep them loyal and feel connected to the brand is the crucial issue for internal marketing Making brand promise to not only customers but also employees is one of many techniques which allowed McDonald’s to be such a successful company The strategies McDonald’s uses are well thought and adapted to the situation The activities which concern the brand suit and perfectly complete the mission it is supposed to Focusing on making positive brand associations and increasing customer loyalty is a way in which McDonald’s earned the position of market leader 3.3 Historical developments in McDonald’s brand building When business is going well the company is expanding to new locations, profits are growing and customers are satisfied and there is little need to change branding strategy However if there are problems with one on these factors, the changes are needed We will look at McDonald’s by identifying methods that were used to prevent the loss of value of the brand Throughout the years Golden Arches had different problems concerning how the brand is perceived 45 When company was founded, the idea of doing business was to deliver swiftly and cheaply The marketing strategy was to communicate this values, and the most important role of the brand was identification When company started franchising and the expansion was going slowly, these objectives did not change Advertisements were supposed to make customers aware of the brand Deep brand awareness was the goal of branding However with the time, as company started more rapid geographical expansion to the whole United States ,the first problem occurred In 1970s one of two big problems McDonald’s was facing were the local owners of fast-food restaurants By 1965 there were 700 McDonald’s restaurants which main strategy was the cleanliness, good value for money, friendly service It was the Ray Kroc motto of QSC&V which was introduced when he bought the rights to McDonald’s In order to make serving burgers even more efficient the Styrofoam was introduced to packaging With the advantages it offered the company was gaining market share, expanding to new locations and making profit The brand was built successively and awareness was so deep that McDonald’s became market leader in fast-food sector The first attacks on the brand were at the end of the 1980s, the beginning of the 1990s Firstly there Styrofoam packaging was attacked, what made McDonald’s to return to the original (paper and cardboard) packaging which was more ecological After one crisis of brand image was prevented, another emerged There were many studies done, which concerned healthy lifestyles, and fast-food was attacked because of manufacturing strategies and how unhealthy the food is, and proven it causes fatal illness like heart disease or cancer One of this companies was McDonald’s The company smoothly agreed on introducing 100% vegetable oil, low fat milk, fibre rich breakfasts options and new salads In addition to that the company had to start labelling the ingredients and nutrition content By the time these changes were necessary McDonald’s had made favourable and unique brand associations in consumer minds which were strong enough to overcome this major public criticism of fast-food industry The fast-food culture was growing, making more and more Americans eat at these kind of restaurants Since McDonald’s was able to establish strong brand association before the crisis, after it was taken care off it could start affecting feelings and judgement of the customers The positive reactions on the brand were the main issue of marketers The company conducted new campaigns to gain more customers and to increase profits However in 2000s another crisis concerning how the brand is perceived emerged Sales were declining, market share was shrinking, customer satisfaction and employee morale was low and franchisees were frustrated In 2000 there were many protest against globalization and since McDonald’s was one of the companies which successfully expanded to other countries 46 there were acts of vandalism concerning McDonald’s restaurants Few years later World Health Organization criticised fast-food culture In order to recapture image McDonald’s had to introduce even more healthy menu One more time more healthy salad meals and fruit ranges had to be added to the menu The CEO of McDonald’s, James Cantalupo, used phrase “We took our eyes off the fries”(Lynch, 2009) to emphasize it was the important moment for the company The changing tastes and lifestyles began impacting the Golden Arches and causing the rebranding Another issue that also had played important role when making decision to rebrand was the market situation “The traditional burger and fries market was mature in North America in terms of growth and there was strong competition”(Lynch, 2009) The covering of the United States with the McDonald’s restaurant was pretty much done, and it was time for other strategies which would produce more growth and strengthen the brand The biggest change was the change of association with unhealthy kids McDonald’s started targeting teens rather then children The popularity of McDonald’s was so great, that even a documentary was made about it, but in a bad context Morgan Spurlock in his documentary “Super Size Me” ate for one month only at McDonald’s After the month he was examined and tested and the conclusion was his health went worse because of eating at McDonald’s Even though, it can be argued how reliable was the test, there are still evidence eating fastfood is unhealthy The film was aired in 2004, what causes the perceives of brand to be even more negative McDonald’s was still making profits, however there was the change in growth In order to take care of this problem the Golden Arches decided to introduce new design There was a need to upgrade the brand and distinguish it from the competitors to the greater depth, since the audience has grown older The image was threatened by strategies which were no longer successful and could create the opposite of what was desired In 2006 McDonald’s decided on evolution, which allowed moving forward by building a brand upon old design features which proved to be doing well The design was changed by using less plastic, more brick and wood, the green tone was introduced to the décor These change were necessary, since childish bright flashy colors previously used did not fit the new brand strategy The natural colors communicated a more adult friendly approach This change proved to be successful, since the company kept brand recognition and customers did not get confused By offering fast-food in less hectic and more relaxed environment McDonald’s was able to maintain loyalty for which it worked so hard This change made company more sophisticated and look like it was more aware of the issues concerning environment Another big step which McDonald’s took in changing its brand was introduction of McCafe This concept, which was started in 1993 and originally was used only in peak hours was developed 47 and adopted to the whole company in 2008 “McDonald’s executives recognised McCafe had developed its own brand equity discretely from the McDonald’s master brand”(Wright 2007:442) The establishment of separate identities, which had some similar attributes, but were focused on discrete customer segments was the original idea, that McDonald’s needed This form of co-branding resulted in advantages in many fields like attracting customers and creating competitive advantage The frequency of different types of customers being interested in a brand resulted in more intense and active brand loyalty McCafe provided different attributes to the customers, like moving from processed to fresh food while maintaining the original attributes like price and convenience The reinvigoration of brand equity The changes from 2006 made the brand look more sophisticated, while changes from 2008 made in more extended, thus making more associations and increasing already high awareness The most recent idea concerns offering free Wi-Fi internet in restaurants The technological expansion of the brand was necessary not only due to the popularity and omnipresence of the internet, but also to keep up with the competition McDonald’s in order to be more connected with teenage customers took care of its brand image by implementing new strategy It is not the first time, and not the last one, when McDonald’s is revitalizing and improving its brand As it is shown the company is able to take care of the brand when there is a need The unnecessary changes are not made when they are not needed, but once they are done they are carefully thought out The brand image is safe since McDonald’s proves to be company that knows how to take care of its future 3.4 Perspectives for McDonald’s Current situation of McDonald’s brand seems relatively strong In order to better understand in what stage of development McDonald’s is, and how its brand equity has built, few studies have to be compared The best model which will depict present situation is Brand Asset Valuator Studies of Young and Rubicam, John Gerzema, and Philip Kotler will be used to find out at what level are individual pillars for McDonald’s By looking at the relationship among the four pillars it will be possible to the assessment of health and stage McDonald’s is nowadays In studying McDonald’s, first the relationship between pillars constituting Brand Strength and Brand Stature will be examined and then the overall association of four levels 48 During studies of advertising agency Young and Rubicam, relationship between first two pillars, Differentiation and Relevance was described In their paper from 2003 they classified McDonald’s in the group whose Relevance is significantly greater than Differentiation This group is characterised by price, which is the primary reason to buy what makes the brand commoditized The level of last two pillars, brand stature, is described in a book The Brand Bubble In 2008 author of the book characterised McDonald’s in a group of companies, which score high on both Esteem and Knowledge This means that “the brand has successfully established itself in the hearts and minds of consumers”(Gerzema, 2008) Such a level can only be achieved through successful brand management Gerzema in his book uses also Energy Index (assesses level of Brand Strength) on a scale from to 100 McDonald’s level of energy is in a group of Kinetic brands, which score between 60 and 74 Kinetic brands “have already come a long way Perhaps now is the time to think beyond the confines of the market, and the functionality of the product, and consider how to give the brand a wider social relevance”(Gerzema, 2008) Potential of creating a brand value is still high for McDonald’s, however it has to start thinking about new methods of building brand equity The four pillars of BAV combined suggest that McDonald’s is situated in the Mass Market position, sometimes also called Established Leadership or Declining Leaders McDonald’s is still the leader in its category, however it is slowly loosing pricing power and future growth potential The results of studying literature seem to confirm this result Kotler and Keller in their current book Marketing Management made similar conclusions McDonald’s is clearly a market leader and it will not give that position that easily The generalized idea of McDonald’s position is not enough to assess how exactly is the company performing To understand it better precise and up to date data of McDonald’s and it’s competitors are needed John Gerzema on his website offers the current data and comparison of different brands which are presented on a BAV model The incorporation of McDonald’s and it’s two main competitors, Subway and KFC gave the result shown in figure 10 49 Figure 10 BAV Mapping of the stages of Consumer Attraction for McDonald’s versus Subway and KFC (Source: www.johngerzema.com/index.php/brand-asset-valuator) From the graph we can see, that McDonald’s in not the only company in fast food service, which has the strong brand It is worth mentioning that the evaluation of brand equity of competitors shows that they score higher in the Uniqueness dimension while being very close to McDonald’s in the other three Pillars However, how the company is perceived and what is the financial value of the brand shows the discrepancy between McDonald’s and its competitors The data of how much each brand is worth can be taken from BrandZ study published by Millward Brown Optimor Interviewing consumers and professional, and asking them to evaluate brand in a competitive context, provide valuable information which helps in assessing the intangible value gained by McDonald’s company The results are plotted in a graph 50 Graph Financial comparison of the brands There are strong evidence showing McDonald’s brand is a strong leader Even though competitors brand equity is perceived better by the consumers, the value of McDonald’s brand is estimated to be a lot higher Continuous innovation, incorporation of new marketing strategies allow McDonald’s to be the most valued fast-food restaurant It will take long time for existing competitors to earn as much as McDonald’s They are maybe able to make their brands be perceived better, but McDonald’s is unique with its history Becoming powerful brand at the same time USA growth in power make customers feel connected with the brand It is a dream of every fast-food provider to be as successful as the Golden Arches Even though there are problems with brand image from time to time, McDonald’s brand holds its strong position McDonald’s faced many problems in its history concerning the brand, however it was always able to get itself out of trouble thorough wise brand management It survived the test of time by careful selection of branding strategies Nowadays McDonald’s is restoring its brand image by making changes in décor, menu and applying new technologies It seems that McDonald’s is back on track, and value of the brand will reach higher increase soon The Golden Arches can expect, that there still will be attacks on image and protest against the 51 ethics, but as time showed, McDonald’s is able to adapt its branding strategy to the changing national market Even though, from time to time there are minor slips in how the brand is perceived the overall evaluation of the brand in the United States is positive The rising number of environmentalist and opponents of fast-food suggests that McDonald’s will have to face issues concerning brand image in the future However it will be difficult to affect brand associations that consumers have in their minds right now The Americans’ force of habit and specific culture will allow company to prosper in the United States for many long years Therefore the future will not be about survival on the market It will rather be about development and growth The limited geographical spread and stiff competition will force McDonald’s to improve the brand McDonald’s had definitely build a strong brand, but it will be the challenge to keep it like that in the future McDonald’s is a company that started operating in the middle of 20th century Throughout the years new products were introduced and new marketing campaigns were used to get customers’ attention The identity of the brand was built through adding different brand elements The expansion to new locations and heavy advertisements in US media created deep and broad brand awareness McDonald’s understood that successful brand building would help company in the future By implementing different branding strategies the Golden Arches were able to create unique brand associations The company communicated the meaning of the brand in order to create strong and favourable image of the brand in consumers’ minds McDonald’s knew that having a strong brand could be taken step further and affect judgement and feelings in order to create positive reaction to the brand every time To get the positive response McDonald’s promoted McDonald’s lifestyle Brand equity drivers like marketing activities and internal branding helped in this process McDonald’s has known from the very beginning, that the goal of a strong brand is to make customers loyal The creation of intense and active relationship was the key to McDonald’s success Profits were growing, market share rising and the brand became part of the national culture From this moment McDonald’s became the strongest brand in the US fast-food market It reaped the benefits from this position, however it was not easy Since McDonald’s was the strongest brand, it was attacked for what it represented, as people believed, all fast-food restaurants The attacks on packaging, unhealthy food and excessive advertising to children focused critics on McDonald’s since the first thing that came to people mind’s, when thinking about company that is connected with children, was McDonald’s The Golden Arches accompanied few generations, so the knowledge about it’s branding strategy was more then enough to attack it However 52 McDonald’s was able to withstand all these attacks, and by implementing and evolving the brand became even stronger More green and healthy profile of the company allowed the brand to survive the attacks In order to change image even further McDonald’s was looking for new extensions Changing the strategy towards teenagers is an operation which allowed the further growth of significance of the brand on the market First the idea of McCafe and then free Wi-Fi helped in making the brand looks up-to-date and aware of consumer needs All changes McDonald’s made in its operations were connected with an idea of increasing value of the brand, and therefore gaining loyal customers Even though McDonald’s comparing to its competitors is not perceived as the best one on the market, the profits show that positive brand evaluation is only one on many aspect in making customers loyal The future is bright for the Golden Arches, since McDonald’s clearly know how to manage its brand successfully Conclusion Managing the brand is not an easy task However there are certain models which are helpful and provide good background for assessment of the brand The aim of the first chapter was to provide theories and models of brand building which may be applied to any company Benefits from having a brand are overwhelming, and as the case of McDonald’s showed, they help in hard times It cannot be denied, that brand is minor part of doing business It influences identification, practicality, loyalty and many other operations which create differences between brands Building a strong brand requires not only strategy, but also tactics of how to implement it Focusing on thorough evaluation and creation of brand building process leads to success And success is achieved, when customers knowledge of the brand is inconvertible The concepts presented are about getting consumers or employees more involved with the brand Proper development and integration of brand elements is necessary to achieve this goal Brand elements are integral part of brand equity Only the best companies, like McDonald’s can use them to create the magic moment which will stay with consumers for a long time The creation of brand equity is a main target of branding The models which apply theoretical knowledge with consumer surveys are the best valuator of brand equity Choosing brand building strategy should be done by carefully studying the current position of the brand 53 Looking at the history of the leader in fast food business, analyzing it’s brand equity and positioning on the market, helps understand the phenomenon of the Golden Arches A successful brand building proved to be a key to McDonald’s success in today’s world When competition is stiff, information flow unstoppable and consumer have more possibilities then ever, getting attention is the crucial part of doing business The role of McDonald’s brand is to keep customers engaged in the brand Once they experience and understand the complexity of brand values, their memories will lead them back to the company Tying product to the brand experience is as important as tying a feeling to the brand It allows consumers to discover the brand McDonald’s was successful in bringing brand personality to life McDonald’s was also able to shape the entire generations what created a devoted audience of potential customers By selling not only features and benefits but also experience, the specific lifestyle was promoted Using relevant ways to reach customer is a key to success of McDonald’s Keeping customer excited every time when making purchase made consumers engaged with the brand Every function is useful if it is managed properly and applied to current needs World is changing, and so is McDonald’s Even though there were attacks on McDonald’s brand image, wise usage of branding strategies allowed to get away in one piece Future of the Golden Arches may not be easy, but it definitely is promising among other 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The interesting problem of McDonald’s brand will be researched at in this thesis Problem Statement The main goals of the thesis are to explain what is a brand, and by applying this knowledge to... the thesis describes what a strong brand is What is the role of the brand? How does the process of brand building looks like? What is brand equity and what are brand equity elements? The thesis. .. building successful brand The thesis does not use all possible theories, that is why conclusion may be concentrated only around approaches presented However the aim of the thesis was to provide theoretical