Renewed Customer Focus Boosts McDonald's Bottom Line

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As one of the world's most iconic brands, McDonald's has fallen on some hard times in recent years. The world's largest restaurant company has suffered disappointing sales growth and declining margins. Certainly one of the big trends behind McDonald's business challenges is an American consumer base that's increasingly opting for healthier foods over fast and convenient foods. But that hasn't stopped other burger-themed restaurant chains such as Shake Shack from expanding. Even Burger King has been posting impressive same-store sales growth in recent years. Part of the reason McDonald's has misfired is that it lost touch with its customers' interests. But buoyed by a strong fourth quarter that beat analysts' expectations, McDonald's recent customer-focused turnaround appears to be putting some luster back in the golden arches.

As one of the world's most iconic brands, McDonald's has fallen on some hard times in recent years. The world's largest restaurant company has suffered disappointing sales growth and declining margins. Certainly one of the big trends behind McDonald's business challenges is an American consumer base that's increasingly opting for healthier foods over fast and convenient foods. But that hasn't stopped other burger-themed restaurant chains such as Shake Shack from expanding. Even Burger King has been posting impressive same-store sales growth in recent years. Part of the reason McDonald's has misfired is that it lost touch with its customers' interests. But buoyed by a strong fourth quarter that beat analysts' expectations, McDonald's recent customer-focused turnaround appears to be putting some luster back in the golden arches.On January 25, McDonald's reported fourth quarter revenues and earnings that blew past analysts' forecasts, led by a 5.7 percent jump in same-store sales, well above the 2.7 percent growth analysts were expecting. CEO Steve Easterbrook, who took over last March, said the company's introduction of an all-day breakfast menu in October was the biggest driver behind the improved results.

It's not just a U.S.-led turnaround. Same-store sales for restaurants open for at least a year jumped 5 percent globally for the quarter ended December 31.

According to research on the top reasons for customer churn at McDonald's conducted by retail consulting firm Conlumino, the company's launch of its all-day breakfast items and other menu changes have addressed customers' top complaints about McDonald's: a lack of menu choice and variety.

Easterbrook has overseen other customer-focused initiatives since coming onboard at McDonald's. The company has focused on providing customers greater transparency on how its food is made while raising wages for employees at its company-owned stores. While pay increases alone aren't a cure-all for employee engagement, it's a step in the right direction.

Customer experience leaders often talk about the importance of concentrating on customer needs and preferences instead of focusing on short-term revenue or business goals. Companies like McDonald's that place its customers first will typically see improvements in business performance.

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EXPERT OPINION