Hello Hamburger Friends,
Today we’re talking about the tactical use of prices and deals and looking at how much value you can squeeze out of a value meal (or how much value they can squeeze out of you).
Our case study is about a flawed 55 cent promotion that over promised and underdelivered, upsetting both customers and franchise operators.
The Price of the Hamburger is Too Damn High
The cost of ground beef has risen sharply from the mid-80’s. In 1984 it was just $1.29 per pound and today is $5.59.
Sens. Elizabeth Warren, Bob Casey, and Ron Wyden sent a sternly worded email to McDonald’s President and CEO Chris Kempczinski demanding to understand how a company could dare increase prices more than inflation (which they also shared with the press of course).
McDonald’s released a statement saying this letter from the senators:
“demonstrates a lack of understanding of our franchise business model and contains contortions of facts and many inaccuracies.”
What is a Modern Hamburger Restaurant To Do?
As consumers and politicians (and even the companies themselves) grow more concerned with increasing prices (let’s ignore that pesky income disparity issue, right?) we have entered a new era in the hamburger business…
The Discount Wars
In recent weeks, McDonald’s, Burger King and Wendy’s announced new value meals, while Target, Walmart, Walgreens and Amazon Fresh said they would cut prices on thousands of items.
So McDonald’s isn’t just fighting other fast food brands, or even other restaurants, but companies like Target, Amazon Fresh, and local grocery stores. Uber Eats and DoorDash present every local food option, meaning a price conscious consumer has a lot of choices.
Case Study: McDonald’s 55 Cent Promotion
All of this leads into our case study, which comes from Dr. David Robinson and the University of Berkeley’s Haas School of Business.
The problem: By 1997, McDonald’s was facing an unsettling challenge: slowing sales growth and intense competition. The fast-food giant unveiled an ambitious and nostalgic strategy—“Campaign 55.” The plan was that each month, a signature burger would be spotlighted at the throwback price of just $0.55, a nod to the year McDonald’s was founded. The campaign launched with the iconic Big Mac.
Faced with customer and franchise owner anger, McDonald’s corporate abruptly pulled the plug on the campaign that was supposed to last the entire year. We go into more detail on the podcast and discuss how these price reduction strategies can backfire.
