Dive Brief:
- McDonald’s posted its first sales decline in the U.S. since 2020 as customer traffic dropped and its “value leadership gap” shrank relative to competitors, executives said on a Q2 2024 earnings call Monday.
- Value is not limited to price, and experiential aspects like cleanliness and convenience account for about a quarter to a third of consumers’ value perception, according to CEO Chris Kempczinski. McDonald’s plans to improve these experiential elements to draw in customers.
- “We're getting faster, we're delivering a better experience, and when you put all that together, that's what defines value for the consumer,” EVP and CFO Ian Borden said during the call. “And we certainly are adamant and relentless that we're going to get that right in each and every market to be in a winning position.”
Dive Insight:
McDonald’s will emphasize better in-restaurant experiences to bolster its value proposition and win back lost traffic.
“Creating a better customer experience has delivered operational improvements, improved service times and increased customer satisfaction across most of our major markets, and it's this relentless focus on execution that will give customers more reasons to visit our restaurants more frequently,” Kempczinski said during the call.
Traffic declined in 2023 as consumers, particularly lower-income consumers, became more discerning about dining out, according to Kempczinski. That pressure continued into 2024, reducing traffic across the fast food industry.
McDonald’s has been fighting inflation, too, with cost increases ranging from 20% to 40%, Kempczinski said.
Despite traffic declines, McDonald’s earned its highest-ever year-to-date customer satisfaction score in Q2.
McDonald’s will continue its efforts to expand loyalty membership, a priority in the first quarter. The company’s loyalty program reached 166 million members during its most recent quarter, and its goal is 250 million loyalty members, according to Kempczinski.
Increasing loyalty sign-ups will help McDonald’s improve CX through a better understanding of customer preferences and behaviors, which will fuel better personalization and power in-store AI investments that could yield better service.
However, loyalty members still represent just about a quarter of McDonald’s overall customer base, and the company’s loyalty push may have emphasized digital value at the expense of overall value, according to Kempczinski.
“I think in a couple of years' time, particularly as you get to 250 million users, that's a different conversation about how digital can drive value,” Kempczinski said. “But today, we just don't have the penetration where we need it to be.
