McDonald's has a new strategy in the fast-food value wars - and it should terrify Taco Bell and Wendy's
- McDonald's launched a two-for-$4 breakfast deal on Monday.
- The chain will continue to offer its $1, $2, $3 dollar menu in addition to the new breakfast promotion.
- The new deal reveals McDonald's strategy of mixing limited-time deals and ongoing platforms to win over budget shoppers.
McDonald's has a new deal to win over bargain shoppers - and it reveals a new dimension of the chain's value game plan.
On Monday, the fast-food giant launched a national two-for-$4 promotion.
As part of the all-day deal, customers can now mix and match two options of the Sausage McMuffin with Egg, Bacon Egg & Cheese Biscuit, and Bacon Egg & Cheese McGriddle for $4.
"What that allows us to do is punch up our focus on breakfast, but it doesn't disrupt or interrupt the whole $1, $2, $3 dollar menu, because it's just kind of a supplement to that," McDonald's CFO Kevin Ozan said at a Bank of America Merrill Lynch conference on Wednesday.
In January, McDonald's rolled out its new $1, $2, $3 value menu in an attempt to bring back customers who ditched the chain after the death of the original Dollar Menu. While the menu was heavily hyped, some analysts have said it has failed to resonate with customers.
Ozan said on Wednesday that McDonald's is doubling down on the $1, $2, $3 dollar menu, and that the roll-out has actually met the company's expectations.
"In the near-term we are looking at customer awareness and I think overall customer awareness is hitting our expectations," Ozan said, acknowledging that awareness around certain items on the menu had fallen short of McDonald's hopes.
"I'd say we're very happy with the launch of it," Ozan continued. "I'm very happy with the construct of it."
In the case of the original Dollar Menu, Ozan said, McDonald's didn't see a traffic increase driven by the menu for six months. The same issue seems to be at play with the $1, $2, $3 dollar menu, with customers first gaining awareness of the menu and then, as time goes on, ideally changing their habits around the menu to visit more frequently.
The roll-out of a value menu involves a different strategy than short-term promotions, such as the two-for-$4 breakfast deal. While other chains, including Taco Bell and Wendy's, rolled out heavily-hyped deals in January to counter McDonald's new value menu, Ozan said that these promotions are unlikely to impact McDonald's in the long term.
The strength of McDonald's strategy, according to Ozan, is that it allows the company to combine short-term deals with a long-term value platform. If McDonald's wants to highlight a certain menu item or attract a new type of customer, it can launch a promotion, all while continuing to offer the $1, $2, $3 dollar menu.
"We like the long-term construct of this menu," Ozan said.
"For us," Ozan continued, "the way we've talked about it is values and interesting proposition and it can take you down a road that you don't want to go down if things get out of control. So we've said ... we are not looking to win necessarily on value, but we know we have to be competitive and we will not lose on value."