Costa and McDonalds Marketing Plans

For this assignment I have been asked to do a report on the marketing techniques used by McDonalds & Costa in order to win a contract

The companies I chose for this marketing report is McDonalds and Costa. I will first begin with is McDonalds.

About McDonalds

McDonald’s is the world’s largest chain of hamburger fast food restaurants. It serves over 68 million customers daily in 119 countries. It was founded in 1940 and now has over 35,000 locations. The revenue generated by McDonald’s is that of .

1057 billion as of 2013. It also employs an impressive 440,000 people.

The types of products McDonalds produce are hamburgers, cheeseburger, chicken burgers and French fries. The Breakfast menu includes items, such as, soft drinks, milkshakes and desserts. It has also recently decided to introduce a new range of café items. In the café range it now offers ‘premium’ coffee and tea as well as light snacks i.e. doughnuts, muffins.

About Costa

Costa is a British multinational coffeehouse.

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It is owned by Whitbread and is the second largest coffeehouse chain in the world. Starbucks is the largest but Costa is the largest in the UK. It was founded in 1971 it then got acquired by Whitbread in 1995. It now has 2,861 stores across 30 countries.

The types of products Costa produces are coffee, tea and iced drinks. Costa also serves a range of Panini’s, toasties, sandwiches, wraps, pastries and muffins. Costa serves a Breakfast menu which includes porridge and toast. Until now it’s only competition has been Starbucks.

Ansoff’s Matrix

This shows how and when marketing companies should use the techniques as show above. So if you have an existing market and product all your need to do is penetrate the market were as if you have the market but not a product you will need to invest in product development.

Marketing strategies used by McDonalds

McDonald’s uses a variety of marketing strategies. One of which is the growth strategy which can take many forms as listed below.

I will write about the Growth strategies in greater detail. For McDonalds they use all the following strategies for growth. Another is survival strategies which also takes place in different forms as listed below.

Growth strategies are:

Market penetration - This is the objective of higher market share in existing markets. This is the least risky of all four strategies. An example of McDonald’s doing this is their Saver Menu. The Saver Menu has a range of cheap food 99p up to £1.49 it means that it is now accessible to more people therefore gaining a higher market share in their existing market.

Market development - This is the strategy of selling an existing product to new markets. This could involve selling to an overseas market, or a new market segment. This is has a moderate risk of all four strategies. McDonald’s do this by opening new stores in multiple countries. They still sell the same products as they would normally which is why there popular with English tourists if they don’t like the countries food. At the time of writing this McDonald’s are in 119 countries and have 35,000 locations.

Product development - This involves taking a new product and devolving it in existing markets. This is has a moderate risk of all four strategies. An example of McDonald’s doing this is there weekly special burgers. Having this means there taking a new product into the market each week. It is a risk with McDonald’s doing this as they cannot be sure if the public will like it but if they do there keep coming back each week to try them.

Diversification - This is the process of selling different, unrelated goods or services in unrelated markets. This is the most risky of all four strategies. An example of McDonald’s doing this is there McCafe range. Usually McDonalds does not sell decent quality hot drinks with the launch of the McCafe range they now sell coffee, tea, doughnuts, muffins and cakes. Now people that would off not normally gone in there for some coffee do.

Survival Strategies are:

Branding – This is the process in which the company creates a unique name, logo and sometimes slogan. The way in which the company does this makes different people perceive that company in different ways. We know McDonald’s has been successful as most people know what we mean by the ‘Golden Arches’. McDonald’s are also universal sponsor for big multinational events such as football matches and Olympic events. They also make it clear in their advertising that the customers they expect is any age group, any race and any gender doing this makes it appeal to the masses.

Relationship Marketing – This is using other ways to engage the customer in a more permanent way than a single transaction i.e. Loyalty cards. A loyalty card at its most basic will give their customers discounts on services. More advanced cards such as a Tesco Clubcard will track what you buy and offer you suggestions or discounts on what you should/do buy the most. McDonald’s offers a loyalty card this works by offering the customer a free coffee for every six you buy. Another way in which McDonald’s has recently promoted offers is by creating an app where if you tweet them your meal at McDonald’s they will reward you with free meals. All these entice a customer back as it makes you feel valued and treated as an individual and by doing this you will return to McDonald’s.

Marketing strategies used by Costa

Costa uses a variety of marketing strategies. One of which is the growth strategy which can take many forms as listed below. Another is survival strategies which also takes place in different forms as listed below.

I will write about the Growth strategies in greater detail. For Costa they use all the following strategies for growth.

Growth strategies are:

Market penetration - Costa developed an advertising campaign for its different varieties of coffee. The campaign made customers more aware of the variety of coffee they offer/sell. It makes the customers both new and existing more familiar with Costa products.

Market development - An example of Costa doing this is there amount of stores both in the UK and other countries and more importantly China. Costa has made a big thing of setting up in China were it is not usually something that the Chinese drink or are into. China now has 326 costa coffee shops. Although this paid off and become rather popular now meaning it really is possible although one of the hardest strategies in the Ansoff’s matrix.

Product development - An example of Costa doing this is there Costa Express machines. It allows Costa’s customers to use the express machine in a rush to have a select lot of hot drinks sold by costa in normal outlets. Costa Expresses are found in many places such as fuel stations, airports and WHSmith’s stores.

Diversification - An example of Costa doing this is there Costa ICE menu, which not only incudes slush puppies like, drinks but also coffee flavoured drinks. You can have it with and without ice as well as blended or not blended. This is not normally a product you would find in costa or even normally wanted by Costa’s target audience.

Survival Strategies are:

Branding – There are no adverts normally shown for Costa unlike McDonald’s. The way Costa advertises is by having stores in high streets and getting people to sign up and use their coffee club membership. Once signed up you get email updates on offers and points balance. Unlike McDonald’s Costa don’t really want to nor intend to have the same target consumer. Whereas McDonalds accepts anybody Costa prefers to have the upper and middle income customers.

Relationship Marketing – Costa does this by offering you points when you buy your drinks and food £1 spent is equal to five points each point is worth a penny. Unlike McDonalds it’s not limited to a certain range of product but everything Costa sell. Also like McDonalds Costa has recently created an app were you use your coffee club card and it will tell you all your deals and when you’re approaching the nearest costa in your location. Costa also use email to stay in contact with you it is a way to have a business to customer conversation. Costa use email to ask you about recent visits, upcoming promotions and other Costa related news. All these entice a customer back as it makes you feel welcome and treated well with staying with Costa.

The Saver Menu has a range of cheap food 99p up to £1.49 it means that it is now accessible to more people.

Costa developed an advertising campaign for its different varieties of coffee.

The size of Costa’s operation is not that big as all there doing is advertising. Whereas McDonald’s is making new products and advertising. Depending on how much they advertise the cost varies and McDonalds also have the extra cost of making and testing their new burgers. The return that is both these companies is more profit and a stronger knowledge of their products. McDonalds will take longer to do as it has to make the products first but once developed this will become popular as you can get more for your money now. Costa’s advertising plan won’t take as long to make but will be effective in the medium to long term as people that don’t go there already probably aren’t interested or can afford the luxury.

Market Development

McDonald’s do this by opening new stores in multiple countries.

Costa do this with the amount of stores both in the UK and other countries and more importantly China.

The size of this operation for both these companies is massive as it involves moving into different countries and buying new stores. Generally this is an expensive but it does depend on the country. This huge cost though is generally expected to result in huge profits for the either company. The time scale for setting up also depends on the country as they may have to pass certain standards that the government have set. Depending on the country on the country and if stores already exist its return will be in the medium to long term to become effective.

Product Development

McDonald’s do this by offering there weekly special burgers.

Costa Express machines. It allows Costa’s customers to use the express machine in a rush to have a select lot of hot drinks sold by costa in normal outlets.

The size of this operation for is large for McDonalds as they have to invest time into product development. The operation is not as big for Costa as it has company making and distributing the machines on their behalf. McDonalds will have a significant cost in making these burgers and then testing them but in return there hoping people will like these burgers and keep coming back to try each weeks new flavours. Costa on the other hand are spending less money to setup these machines this because their expecting a small return. McDonalds will take longer to do. Were as Costa’s is rather quick and will be effective in the short term.

Diversification

Usually McDonalds does not sell decent quality hot drinks with the launch of the McCafe range they now sell coffee, tea, doughnuts, muffins and cakes.

Costa ICE menu, which not only incudes slush puppies like, drinks but also coffee flavoured drinks.

McDonalds idea of a Café style brand is a massive change for the business as they have had to make new sites and create new products as well as train new staff. This therefore it is a huge expense to McDonalds but in return they aim to beat the major competitors i.e. Costa, Starbucks, Café Nero. As people are always in demand for a high quality cup of coffee McDonalds plan should become effective within the short to medium term. Costa are going to make a smaller change for their business as there only making a new product rather than having to setup new stores for it as well. The cost of this plan will be high as they will have to perform product development and testing. This will take a long time to become effective as it is a seasonal based product.

Survival Strategies and Branding

McDonald’s are also universal sponsor for big multinational events such as football matches and Olympic events.

There are no adverts normally shown for Costa unlike McDonald’s. The way Costa advertises is by having stores in high streets and getting people to sign up and use their coffee club membership.

This makes a massive difference to McDonalds as the amount of money they put into getting the brand well know at these types of events pays back rather quickly. It often takes a short term for it to become effective and usually sticks in the persons head. Costa on the other hand does not advertise very often on TV, internet but use their coffee club members emails to do so. The cost is small to them as all they need is a writer and mail server to do this. The time till this becomes effective is not normally that long as people have email accounts linked to phones meaning they can pop into the nearest coffee and redeem whatever they get sent instantly.

Relationship Marketing

McDonald’s offers a loyalty card this works by offering the customer a free coffee for every six you buy.

Costa does this by offering you points when you buy your drinks and food £1 spent is equal to five points each point is worth a penny.

The size of this for Costa is huge also because they have to offer all their products to customers for free when the customer has the correct amount it can be a big expense on the company. It takes Costa a long to medium term for to this to be effective as people need to sign up for it and then generate enough points. Costa also benefits out of this by having a huge database with what that individual customers has brought meaning more personalized emails and instore experience. The cost to McDonalds is less as all there offering to their customers a free coffee after every six but in the long term this could cost more as there is not any customer specific details. It will take a short term to become effective as customers that buy coffee’s already take part in the scheme and don’t have to sign up for anything.