Market Segmentation Criteria

Even McDonald's, which has one of the most recognizable brands in the fast food industry, cannot satisfy every customer's need related to food. However, the company has a strong customer base that consists of different types of consumers. Needs are different for each of these consumers and McDonald's certainly realizes it cannot meet the needs of these various groups by marketing to them in the same way.

The U.S. Department of Agriculture (USDA) conducted a dietary survey in the United States in the late ninety's regarding the consumption of fast food. Based on the sample population, the results had shown two pieces of information important to McDonald's management. First, the percentage of people eating fast food increased from the early 1990's to when the survey was last conducted in the late 1990's, a trend that is most like to carry on. Secondly, the likelihood of eating fast food will actually decrease with age. Thus, younger adults, to whom we plan to market the McDonald's rewards card, are certainly a substantial consumer in the fast food industry.

Other key findings from the USDA research study, were 26.5 percent of adults reported eating fast food, young adults ages 20 to 29 years were about 4 times more likely to eat fast food than adults 55 years of age and older. Fast food are consumed by both genders (30% males, 23.5% females), more African Americans (31%) than other race-ethnic groups reported eating fast food, and young adults living in the Midwest (29%) or in the South (29%) were more likely to be fast food eaters than individuals living in the Northeast (20%) or the West (22%) (Journal of the American College of Nutrition).

With data in hand, McDonald's can begin to pursue the first of the three major steps in target marketing, which is market segmentation. This is the process of dividing a market into clearly defined groups of buyers with different needs: characteristics or behaviors that require a unique market mix (Kotler P. & Keller K., 2006 p. 263). There are four types of criteria that make for a good market segment these criteria are homogenous, heterogeneous, substantial, and operational.

For purposes of marketing our rewards card, homogenous, substantial, and operational criteria will impact our target market selection. Our goal is market the rewards card to young adults. Our expectation is that this group of individuals will respond to our marketing mix in a similar fashion, thus meeting the homogeneous criteria. As for substantial criteria, which is to make certain that the market segment is significant enough to make a profit, survey results from the USDA research study has validated this, in our opinion.

Finally, we have operational criteria, which is extremely important when segmenting a broad product-market. This pertains to factoring in demographic information such as income, gender, geographic location, and age. Once again, the data results from the USDA survey will prove invaluable for our operational use.

Identify your target market

(Insert Sandra's section here---IDENTIFY YOUR TARGET MARKET)

Describe the organizational buyers and consumers of your product and the factors that influence their purchasing decisions.

In order for the reward card to be a success with the target group, the organizations that participate with the reward card program must be companies that are appealing and easily identifiable with the target group. The desired target groups of 18-24 are entertained with movies, music, electronics, internet, clothing, and dining. Therefore, organizations solicited for this product should be companies that offer these products. At the top of the list are retailers such as Best Buy and Wal-Mart, both stores offer CDs, DVDs, electronics, and computers.

To accommodate movie-goers, Moviefone might fit the bill. If a consumer wanted to redeem their points for movie tickets, they could logon to Moviefone to do so. This would require that Moviefone setup their website to accommodate these requests. Also, for the consumer's convenience, the reward card website should contain a direct link to the Moviefone website.

Consumers frequent McDonald's or any fast-food restaurant for the convenience. Convenience alone does not hold customers. This target market group needs variety on a budget. Accuracy with the order and courtesy at the counter or drive-through window goes a long way, too. With that said, McDonald's must continue providing quick service and appetizing menu items. They should also refresh their menu periodically with new items and specials on existing menu items. It is crucial that they remain competitive with other fast-food restaurants with their $1 menu.

Describe how these factors will impact the marketing strategy

McDonald's mission is to provide customers with quality food at a low price. Convenience, fast services, appealing menus, and competitive prices can impact the marketing strategy in many ways, good or bad. Young adults of ages 18 -24 especially like McDonalds because it is convenient, has a relaxed atmosphere, cheap prizes, and have fast services.

These young adults come to McDonald's for signature products they can not find anywhere else and many families visit the restaurants because of their unique ability to put smiles on their children's faces. McDonald's has always shown bits of real life in their commercials that seems to have become a standard for them.

Their marketing efforts go far beyond advertising, including special food promotions, games, videos, cassettes, tapes, videos, CDs that we could not get anywhere else for the value. These items target the young adults of ages 18 -24 and because of the diversity that goes to McDonald's, they developed segmented marketing programs as various key audiences. McDonald's is also the sponsor of important worldwide sporting events as the Olympics and the World Cup soccer, NASCAR car racing, Basketball, and many more.

In addition, McDonald's has tried to market healthier choices on their menus as well as the contents and nutrition of the foods they sell to make the menu more appealing. In the early, 1990's McDonald's marketing research led to many new product introductions and menu changes to accommodate the health conscious. In 1993, McDonald's expanded their operations from stand alone restaurants to joint ventures with restaurants placed in Wal-Mart stores, in Amoco and Chevron gas stations and all throughout Disney's theme parks.

Analyze current competitors and define the competitive landscape for your product

McDonald's has many competitors to compete with in the fast food industry for example Burger King, Wendy's, and Arbys. Burger King is McDonald's biggest competitor with their hamburgers being fire grilled rather than fried; both have the kid's meals with the little toys to attract the younger children and combo meals for the young adults. McDonald's and Burger King both have prepaid cards whereas Wendy's and Arbys do not have these cards.

Wendy's offer not only hamburgers, but they have taken it to their loaded bake potato, chili, and the frost, and compete with the children's meals. Arby's also has a nice menu besides the average hamburgers, they also have chicken salad sandwiches, roast beef sandwiches, and a kids meal that includes a healthy meal such as fruit mix, turkey and ham sandwiches without the crust, with no toys included.

Burger King, Wendy's, Arby's are just a few of McDonald's competitors that McDonald's would have to compete with depending were you are located. There may be more or less competitors but at this time McDonald's, Burger King, Wendy's, and Arby's all offer the hamburger's, fries, chicken sandwiches and the kid's meal, they also have sweepstakes that you can enter to win prizes.

McDonald's competitive landscape for our product, the McDonald's Reward Card, that we have presented would attract McDonald's target consumers between the ages of 18 and 25, will surely bring a higher profit for the McDonald's corporation.

The McDonald's Reward Card will offer the opportunity for our customers to earn points which they will be able to purchase not only food, but to purchase the entertainment that they enjoy, there is no contest that they have to enter and wait for a drawing to win a prize. When they purchase at McDonald's they earn points, it is a win win situation, McDonald's rewards their customers for selecting McDonald's to feed them with the variety of great fast food.

Reference:

Kottler, P., Keller, K., (2006) Marketing Management, 12/e

Pearson/Prentice Hall, Upper Saddle River, NJ