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Project on

Pricing Strategy of McDonalds

In partial fulfilment of requirement for the

Award of Degree of M.Com

Subject:

Marketing Strategies& Plans

Submitted By:

Miss. SEEMA TALREJA

Roll No. 36

M.Com. Part – I, Semester II

Under the Guidance of:

Prof. Mr. Prakash Mulchandani

SMT. CHANDIBAI HIMATHMAL MANSUKHANI COLLEGE

ULHASNAGAR – 421003

UNIVERSITY OF MUMBAI

2015 – 2016

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Department of CommerceCertificate

This is to certify that, Ms. SEEMA.M.TALREJA of M.Com.-I, Sem.-I (Roll

No. - 36), has successfully completed the project titled “Pricing Strategy Of

McDonalds” under my guidance for the Academic Year 2015-16. The

information submitted is true and original as per my knowledge.

Prof. Prakash N. Mulchandani

(Project Guide)

Prof. Gopi Shamnani Dr. Padma V. Deshmukh

(Coordinator, M. Com Course) ( I/C Principal)

External Examiner

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DECLARATION

I, Ms. SEEMA.M.TALREJA student of SMT. CHANDIBAI HIMATMAL

MANSUKHANI COLLEGE, ULHASNAGAR studying in M.Com Part – I,

(Semester – I); I hereby declare that I have completed this project on

“PRICING STRATEGY OF MCDONALDS” for the subject “Marketing

Strategies & Plans” in the academic year2015-16.The information

submitted is true and original to the best of my knowledge

S

EEMA.M TALREJA

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ACKNOWLEGEMENT

To list who all have helped me is difficult because they are so numerous and the depth is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh dimensions in the completion of this project

I take this opportunity to thank the University of Mumbai forgiving me chance to do this project.

I would like thank my Principal, Dr. Padma V. Deshmukh for providing the necessary facilities required for completion of this project.

I would also like to express my sincere gratitude towards my project guide Prof. Mr. Prakash Mulchandani whose guidance and care made

the project successful.

I would like to thank my college library, for having provided Various reference books and magazines related to my project.

Last but not the least, I would like to thank almighty God, my

parents, and my friends who helped me gather these data and have

sat with me for hours discussing about the project.

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Objectives

To study Pricing strategy adopted by McDonalds in Ulhasnagar

To study how price effects the business

To study the discounts pattern.

Limitation

The project is only limited to the study of pricing strategy of only one

restaurant.

Pricing strategy of other restaurants are not being studied.

Comparison is not being done.

Time, length, and depth of the study are limited as per the

requirements of college

Scope

The project begins with a brief mention of what Price is and its

need and importance. It further goes on to show the Price

strategy of McDonalds

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Methodology of study

Data for the project is obtained in two ways primary source and

secondary source.

Primary source-

The primary data is extract by preparing questionnaire and

interviewed manager, staff and customer of McDonalds restaurant

Goal maiden, Ulhasnagar-421003

Secondary source-

Secondary data for the project has been gathered from various

books and internet.

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SR.NO TOPIC PG.NO

1 INTRODUCTION OF PRICING 9

2 CHARACTERISTIC OF PRICING 10

3 IMPORTANCE OF PRICING 11

4 SETTING PRICING POLICY 12

5 PRICING STRATEGY 14

6 5 ELEMENT OF PRICING STRATEGY 21

7 FACTORS EFFECTING PRICING DECISION 29

8 INTRODUCTION OF MCDONALDS 32

9 PHILOSOPHY & VISION 37

10 SWOT ANALYSIS 39

11PRICING STARTEGY ADOPTED BY MC

DONALDS43

12 CONCLUSION 46

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EXECUTIVE SUMMARY

Pricing is the process whereby a business sets the price at which it will sell its products and

services, and may be part of the business's marketing plan.In setting prices, the business will

take into account the price at which it could acquire the goods, the manufacturing cost, the

market place, competition, market condition, brand, and quality of product.

Pricing is also a key variable in microeconomic price allocation theory. Pricing is a fundamental

aspect of financial modelling and is one of the four Ps of the marketing mix. (The other three

aspects are product, promotion, and place.) Price is the only revenue generating element

amongst the four Ps, the rest being cost centres. However, the other Ps of marketing will

contribute to decreasing price elasticity and so enable price increases to drive greater revenue

and profits.

Pricing can be a manual or automatic process of applying prices to purchase and sales orders,

based on factors such as: a fixed amount, quantity break, promotion or sales campaign, specific

vendor quote, price prevailing on entry, shipment or invoice date, combination of multiple

orders or lines, and many others. Automated systems require more setup and maintenance but

may prevent pricing errors. The needs of the consumer can be converted into demand only if the

consumer has the willingness and capacity to buy the product. Thus, pricing is the most

important concept in the field of marketing, it is used as a tactical decision in response to

comparing market situation.

Pricing strategy in marketing is the pursuit of identifying the optimum price for a product.

This strategy is combined with the other marketing principles known as the four P's (product,

place, price, and promotion), market demand, product characteristics, competition, and

economic patterns. The pricing strategy tends to be one of the more critical components of the

marketing mix and is focused on generating revenue and ultimately profit for the company. The

success in pricing strategies for businesses is heightened with clarity on market conditions, an

understanding of the consumer's unmet desire, and the amount they are willing to pay to fulfil it.

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P R I C I N G - I N T R O D U C T I O N

A business can use a variety of pricing strategies when selling a product or service. The price

can be set to maximize profitability for each unit sold or from the market overall. It can be used

to defend an existing market from new entrants, to increase market share within a market or to

enter a new market. Businesses may benefit from lowering or raising prices, depending on the

needs and behaviours of customers and clients in the particular market. Finding the right pricing

strategy is an important element in running a successful business.

• Narrowly, price is the amount of money charged for a product or service.

• Broadly, price is the sum of all the values that consumers exchange for the benefits of

having or using the product or service.

• Dynamic Pricing: charging different prices depending on individual customers and

situations.

Price is the one element of the marketing mix that produce revenue ; the other element

produce cost, prices are the easiest marketing mix element to adjust ; product features,

channels and even promotion take more time .price also communicating to the market the

company’s intended value positioning of its product or brand

Today companies are wrestling with a number of difficult pricing tasks

How to respect to aggressive price cutters

How to price the same product when it goes through different channels

How to price the same product in different countries

How to price on improved product while still selling the previous version

Many companies do not handle pricing well. They make these common mistakes; price is to

cost-oriented ; price is not revised often enough to capitalize on market changes; price is set

independent of the rest of the marketing mix rather than as an intrinsic element of marketing

positioning strategy; and price is not varied enough for different product item ,market

segmentation , distribution channels, and purchase occasions.

Companies do their pricing in a variety of ways. In small companies, price is often set by the

boss. In larger companies, pricing is handling by division and product line managers. Even here,

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top management sets general objectives and policies and often approve the prices proposed

by lower level of management.

Ch a ra c te r is t ics of s t r a t e g ic p r i c ing

P ro a c t i ve – S tr a t e g ic pri c ing follows an approach to a busin e ss si tuation that

involves anticipating ma r k e t a nd c ompeti t ion c h a n g e s in a d v a n c e of their actual

occurrence and making a ppropriate o r g a ni z a t i on a l shifts in r e sp o nse. Many hi g h

t ec hnol o g y busin ess op e r a tors n ee d to take a more proactive strategy to d ea l with the

rapidly changing ma r k e tp l a c e for their c o mpa n y 's prod u c t s .

V a lue B a s e d - Value-based pricing is about coming up with a price that your

customers are willing to pay. Value-based pricing (VBP) is the most highly

recommended pricing technique by consultants and academics. The basic concept is

s e t t ing a pri c e to capture the majority of what your customers are willing to pay.

Strategic pricing takes into account how much value the customer is going to get out

of that particular product and then keeping that in mind he sets the final price of the

product.

P ro f it D r iven - A profit-oriented pricing strategy involves setting prices for

your products that will guarantee you'll make money on each sale. You determine

your cost for manufacturing each product, then add a percentage for profit. There are

some strategies and issues you should review before setting prices in this manner.

While profits are the goal of any business, setting prices based on profit goals can

present some problems for your business. If competitors price similar products for

less, you may have to weather some lost sales. Though you can price each product to

guarantee a profit, if you find yourself at the high end of the price range, be prepared

to lose customers who are bargain hunters. Having the highest-priced product may

not be entirely negative; many companies such as Apple and Cadillac routinely

charge more than competitors but attract a quality-oriented customer. If you can

compete on quality, you may be able to maintain your profit-oriented pricing strateg

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IMPORTANCE OF PRICING

When marketers talk about what they do as part of their responsibilities for marketing

products, the tasks associated with setting price are often not at the top of the list.  Marketers

are much more likely to discuss their activities related to promotion, product development,

market research and other tasks that are viewed as the more interesting and exciting parts of

the job. 

Yet pricing decisions can have important consequences for the marketing organization and

the attention given by the marketer to pricing is just as important as the attention given to

more recognizable marketing activities.  Some reasons pricing is important include:

Most Flexible Marketing Mix Variable – For marketers price is the most adjustable of all

marketing decisions.  Unlike product and distribution decisions, which can take months or

years to change, or some forms of promotion which can be time consuming to alter (e.g.,

television advertisement), price can be changed very rapidly.  The flexibility of pricing

decisions is particularly important in times when the marketer seeks to quickly stimulate

demand or respond to competitor price actions.  For instance, a marketer can agree to a field

salesperson’s request to lower price for a potential prospect during a phone conversation. 

Likewise a marketer in charge of online operations can raise prices on hot selling products

with the click of a few website buttons.

Setting the Right Price – Pricing decisions made hastily without sufficient research, analysis,

and strategic evaluation can lead to the marketing organization losing revenue.  Prices set

too low may mean the company is missing out on additional profits that could be earned if

the target market is willing to spend more to acquire the product.  Additionally, attempts to

raise an initially low priced product to a higher price may be met by customer resistance as

they may feel the marketer is attempting to take advantage of their customers.  Prices set too

high can also impact revenue as it prevents interested customers from purchasing the

product.  Setting the right price level often takes considerable market knowledge and,

especially with new products, testing of different pricing options.

Trigger of First Impressions - Often times customers’ perception of a product is formed as

soon as they learn the price, such as when a product is first seen when walking down the

aisle of a store.  While the final decision to make a purchase may be based on the value

offered by the entire marketing offering (i.e., entire product), it is possible the customer will

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not evaluate a marketer’s product at all based on price alone.  It is important for marketers to

know if customers are more likely to dismiss a product when all they know is its price. 

Some of the more common pricing objectives are:

Maximize long-run profit

Maximize short-run profit

Increase sales volume (quantity)

Increase dollar sales

Increase market share

Obtain a target rate of return on investment (ROI)

Obtain a target rate of return on sales

Stabilize market or stabilize market price: an objective to stabilize price means that

the marketing manager attempts to keep prices stable in the marketplace and to

compete on nonprime considerations. Stabilization of margin is basically a cost-plus

approach in which the manager attempts to maintain the same margin regardless of

changes in cost.

Company growth

Maintain price leadership

Desensitize customers to price

Discourage new entrants into the industry

Match competitors prices

Encourage the exit of marginal firms from the industry

Survival

Avoid government investigation or intervention

Obtain or maintain the loyalty and enthusiasm of distributors and other sales

personnel

Enhance the image of the firm, brand, or product

Be perceived as “fair” by customers and potential customers

Create interest and excitement about a product

Discourage competitors from cutting prices

Use price to make the product “visible"

Build store traffic

Help prepare for the sale of the business (harvesting)

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SETTING PRICING POLICY

STEP 1: SELECTING THE PRICING OBJECTIVES:

The company first decides where it wants to position it market offering. The clearer a firm’s

objectives, the easer is to set price. A company can pursue any of five major objectives

through pricing: survival, maximum current profit, maximum market share, maximum

market skimming, or product quality leadership.

Company purchase survival as their major objective if they are plagued with over capacity,

intense competition, or change in consumer wants. As long as prices cover variable costs

and some fixed costs, a company stays in business. Survival is a short run objective; in the

long run, a firm must learn how to add value or face extinction.

Many companies try to set prices that will maximize current profits. They estimate the

demand and costs associated with alternative prices and choose the price that produces

maximum current profit, cash flow, or Rate of return on investment. This strategy assumes

that the firm has knowledge of its demand and cost functions; in reality, these are difficult to

estimate. In emphasizing current performance, a company may sacrifice long run

performance by ignoring the effects of other marketing mix variables, competitors’

reactions, and legal restraints on price.

Some companies want to maximize their market share. They believe that a higher sales

volume will lead to lower cost and higher long run profit they set the lowest price assuming

the market is price sensitive.

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It often happens that companies unwilling a new technology favor setting high prices to

“skim “the market. Sony is a frequent practitioner of market skimming pricing.

When Sony introduced the world’s first high definition television (HD-TV) to the Japanese

market in 1990, the high-tech sales cost $43000.This television were purchased by

customers who could afford to pay a high price for the new technology. Sony rapidly

reduced the price over the next three years to attract new buyers, and by 1993a 28-inch H-D

tv cost Japanese buyers just over $6000.In 2001 a customer cold buy a 40-inch H-D TV for

about $2000.A price many could afford. In this way, Sony skimmed the maximum amount

of revenue from the various segments of the markets.

STEP 2: DETERMING DEMAND:

Each price will lead to different level of demand and therefore have a differ impact on a

company’s marketing objectives. The relation between alternative prices and the resulting

current demand is captured in demand curve. In the normal case, demand and price are

inversely related; the higher the price, the lower the demand. In this case of prestige goods

the demand curve sometimes slopes upward. Perfume Company raised its price and sold

more perfumes rather than less! Some customer takes the higher price to signify a better

product. However if the price is too high, the level of demand may fall.

On the other hand, the impact of internet has been to increase customers’ price sensitivity. In

buying a specific book online, for e.g. , a customer can compare the price offered by over 2

dozen online book stores by just taking mysimon.com. These prices can differ by as much as

20 percent. The internet increases the opportunity for price sensitive buyers to find and favor

lower-price sites. At the same time, many buyers are not that price sensitive. McKinsey

conducted a study and found that 89 percent of internet customers visit only 1 book site, 84

percent visited only 1 toy site, and 81 percent visited only 1 music site, which indicates that

there is a less price comparison shopping taking place on the internet that is possible.

Companies need to understand the price sensitivity of their customers and prospects and

their trade-offs peoples are willing to make between price and product’s characteristics.

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STEP 3: ESTIMATING COSTS

Demand sets a ceiling of a price on the price the company can charge for its product.

Costs set the floor. The company wants to charge a price that covers its cost of

production, distributing, and selling the product, including a fair return for its efforts and

risks

TYPES OF COSTS AND LEVELS OF PRODUCTION

A company’s costs take two firms, fixed and variable. Fixed costs (also known as over

head) are costs that do not vary with production or sales revenue. Accompany must pay bills

each month for rent , heat, and trust, salaries, and so on , regardless of output

Variable costs vary directly with the level of production. For example, each hand

calculator produced by Texas Instruments involves a cost of plastic, macro-processing chips,

packaging, and the like. These costs tend to be constant per unit produced; they are called

variable because their total varies with the number of unit produced.

Total cost consists of the sum of the fixed and variable costs for any given level of

production. Average costs is the cost per unit at that level of production; if is equal to total

cost divided by production. Management wants to charge a price that will at least cover a

total production cost at a given level of production.

ACCUMULATED PRODUCTION

Suppose TI runs a plant that produces three thousand hand calculators per day. As TI gains

experience producing hand calculators, its methods improve. Workers learn shortcuts,

materials flow more smoothly, and procurement costs falls. The result shows, in that average

cost falls with the accumulated production experience.

DIFFERENTIATED MARKETING OFFERS

Today’s companies try to adopt their offers and terms to different buyers. Thus a

manufacturer will negotiate different terms with different retail chains. One retailer may

want daily delivery (to keep stock lower) while an other may accept twice a week delivery

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in order to get a lower price. The manufacturer’s costs will differ with each chain, and so

will its profits.

TARGET COSTING

Costs change with production sale and experience. They can also change as a result of

concentrated efforts by designers, engineers and purchasing agents to reduce them.

STEP 4: ANALYZING COMPETITORS COSTS, PRICES, &OFFERS:

Within the range of possible prices determined by market demand and company’s costs, a

firm must take the competitor’s costs, prices, and possible price reactions into account. The

firm should first consider the nearest competitor’s price. If the firm offers contains positive

differentiation features not offered by the nearest competitors, their worth to the customer

should be evaluated and added to the competitor’s price. If the competitor’s offers contains

some features not offered by the firm, their worth o the customer should be evaluated and

subtracted from the firm’s price. Now the firm can decide whether it can charge more, the

same, unless than the competitor. A firm must be aware, however, that competitors can

change their prices in reaction to the price set by the firm.

STEP 5: SELECTING THE PRICING METHOD:

Given the three cs- the customers’ demand schedule, the cost function, the competitors’

prices- a company is now ready to select a price.

Companies select a pricing method that includes one or more of various considerations. We

will examine seven price setting methods: mark-up pricing, target return pricing, perceive

value pricing, value pricing, going rate pricing, action type pricing and group pricing.

MARK-UP PRICING:

The most elementary pricing method is to add a standard mark-up to the product’s cost.

Construction companies submit job bids by estimating the total project cost and adding a

standard mark-up for profit.

Suppose a toaster manufacture has a following cost and sale expectation

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Variable cost per unit …………….. $1

Fixed cost ………………. 300,000

Expected unit sales ……………. 50,000

The manufacturer’s unit cost is given by

Unit cost= variable cost + fixed cost =$10+ $300,000 =$16

Unit sales 50,000

Now assume the manufacturer wants to earn a 20 % mark-up on sales. The manufacturer’s

mark-up price is given by:

Mark-up price = unit cost = $16 =$20

(1-desired return on sales) 1-0.

TARGET-RETURN PRICING:

In target return pricing the firm determines the price that would yield its target rate of return

on investment (ROI). Target pricing is used to general motors, which price its auto-mobiles

to achieve a 15-20 percent ROI.

PERCIVED-VALUE PRICING:

In increasing number of companies based their price on the customer’s perceived value.

They must deliver the value promised by their value proposition, and the customer must

perceive this value. They use the other marketing mix elements, such as advertising and

sales force, to communicate and enhance perceive value in buyer’s mind.

VALUE-PRICING :

In recent years, several companies have adopted value pricing, in which they win loyal

customers by charging a fairly low price for a high quality offering. Among the best

practitioners of value pricing are WALL-MART, IKEA, and SOUTH-WEST airlines.

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GOING RATE-PRICING:

In going rate pricing,the firm basis its price largely on competitors prices. The firm might

charge the same, more, or less than major competitors. In oligopolistic industries that sell a

commodity such as steel, paper, or fertilizers, firms normally charge the same price.

ACTION TYPE PRICING:

Is growing more popular,especially with the growth of the internet. There are over 2000

electronic market places selling everything from pigs to use vehicles to cargo to chemicals.

One major use of actions is to dispose of excess inventories or to use good. Company needs

to be aware of the three major types of actions and their separate pricing procedures

*ENGLISH ACTIONS (ascending bids)

*DUTCH ACTIONS (descending bids)

*SEALED BIDS ACTIONS

GROUP PRICING:

The internet is facilitating methods where by consumers are business buyers can join groups

to buy at a lower price. Consumer can go to volumebuy.com to buy electronics, computers,

subscriptions, and another item.

STEP 6: SELECTING THE FINAL PRICE:

Pricing method narrow the range from which the company must select its final price. In

selecting that price, the company must consider additional factors including physiological

pricing, gain and risk sharing pricing, the influence of other marketing mix-elements on

price, company pricing policy and the impact of price on other parties.

PHYSIOLOGICAL PRICING:

Many customers use price as an indicator of quality. Image pricing is especially effective

with ego-sensitive products such as perfumes and expensive cars.

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GAIN-RISK-SHARING PRICING:

Buyer may resist accepting a seller’s proposals because of the high perceive level of a risk.

The seller has the option of offering to absorb part or all of the risk if he does not deliver the

full promised value.

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PRICING STRATEGY

NEW PRODUCT

Pricing strategies usually change as the product passes through its life cycle. The

introductory stage is especially challenging. Companies bringing out new product face the

challenge of setting prices for the first time

1 ) Market-skimming pricing

The practice of ‘price skimming’ involves charging a relatively high price for a short time

where a new, innovative, or much-improved product is launched onto a market.

The objective with skimming is to “skim” off customers who are willing to pay more to

have the product sooner; prices are lowered later when demand from the “early adopters”

falls.

The success of a price-skimming strategy is largely dependent on the inelasticity of demand

for the product either by the market as a whole, or by certain market segments.

High prices can be enjoyed in the short term where demand is relatively inelastic. In the

short term the supplier benefits from ‘monopoly profits’, but as profitability increases,

competing suppliers are likely to be attracted to the market (depending on the barriers to

entry in the market) and the price will fall as competition increases.

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The main objective of employing a price-skimming strategy is, therefore, to benefit from

high short-term profits (due to the newness of the product) and from effective market

segmentation.

There are several advantages of price skimming

• Where a highly innovative product is launched, research and development costs are likely

to be high, as are the costs of introducing the product to the market via promotion,

advertising etc. In such cases, the practice of price-skimming allows for some return on the

set-up costs

• By charging high prices initially, a company can build a high-quality image for its product.

Charging initial high prices allows the firm the luxury of reducing them when the threat of

competition arrives. By contrast, a lower initial price would be difficult to increase without

risking the loss of sales volume

• Skimming can be an effective strategy in segmenting the market. A firm can divide the

market into a number of segments and reduce the price at different stages in each, thus

acquiring maximum profit from each segment

• Where a product is distributed via dealers, the practice of price-skimming is very popular,

since high prices for the supplier are translated into high mark-ups for the dealer

• For ‘conspicuous’ or ‘prestige goods’, the practice of price skimming can be particularly

successful, since the buyer tends to be more ‘prestige’ conscious than price conscious

Similarly, where the quality differences between competing brands is perceived to be large,

or for offerings where such differences are not easily judged, the skimming strategy can

work well. An example of the latter would be for the manufacturers of ‘designer-label’

clothing.

Disadvantages of Price Skimming

1. This strategy can backfire if there are close competitors and they also introduce same

products at lower price than consumers will think that company always sells the

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products at higher prices which will result in consumers abandoning other products

of the company also.

2. Price skimming is not viable option when there are strict legal and government

regulations regarding consumer rights.

3. If the company has history of price skimming than consumers will never buy a

product when it is newly launched, they would rather wait few months and buy the

product at lower price.

2) Market-Penetration pricing

Penetration pricing involves the setting of lower, rather than higher prices in order to

achieve a large, if not dominant market share.

This strategy is most often used businesses wishing to enter a new market or build on a

relatively small market share.

This will only be possible where demand for the product is believed to be highly elastic, i.e.

demand is price-sensitive and either new buyer will be attracted, or existing buyers will buy

more of the product as a result of a low price.

A successful penetration pricing strategy may lead to large sales volumes/market shares and

therefore lower costs per unit. The effects of economies of both scale and experience lead to

lower production costs, which justify the use of penetration pricing strategies to gain market

share. Penetration strategies are often used by businesses that need to use up spare resources

(e.g. factory capacity).

A penetration pricing strategy may also promote complimentary and captive products. The

main product may be priced with a low mark-up to attract sales (it may even be a loss-

leader). Customers are then sold accessories (which often only fit the manufacturer’s main

product) which are sold at higher mark-ups.

Before implementing a penetration pricing strategy, a supplier must be certain that it has the

production and distribution capabilities to meet the anticipated increase in demand.

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The most obvious potential disadvantage of implementing a penetration pricing strategy is

the likelihood of competing suppliers following suit by reducing their prices also, thus

nullifying any advantage of the reduced price (if prices are sufficiently differentiated the

impact of this disadvantage may be diminished).

A second potential disadvantage is the impact of the reduced price on the image of the

offering, particularly where buyers associate price with quality.

Advantages of Penetration Pricing

1. Adoption and Diffusion

Diffusion is the process of acceptance of a new product or service by the consumers.

Adoption is similar to diffusion here the focus is on the psychological acceptance of

the product by the consumer. Rate of diffusion or adoption is the speed at which it is

accepted. Both adoption and diffusion rates are high when penetration policy is

adopted.

2. Not much competition in the initial phase

When penetration pricing is introduced the competitors are caught unaware. Most

importantly it leaves them with very little reaction time. So in the initial phase not

much competition is faced.

3. Good will among early customers

Happy at having struck a profitable deal the customers are ready to come back to the

manufacturer in future. This goodwill created also leads to further promotion of the

product through "word of mouth".

4. Cost efficiency

The emphasis on keeping the price low helps in controlling the cost thereby cost

efficiency is achieved.

5. Competitors are kept at bay

If a manufacturer adopts penetration pricing and lowers the price of his products or

services he may stop competitors from entering the market. This happens because 24

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now the competitors will have to enter the market at lower than existing prices. This

reduces their profit not to mention the risk they face as new entrants in acquiring

market share.

6. Channel benefit

As this technique creates a quick turnover it keeps its retailers and distributers happy.

Disadvantages of Penetration pricing

1. The customer expects the prices to remain low for a long term. They are not ready

for the subsequent rise in the price and when it happens they might switch to a

competitor's product. Thus subsequent price hike leads to loss of market share

gained.

2. It is believed that penetration pricing cannot create strong customer relationship and

only attracts customers on the lookout for a profitable deal.

3. There are two ways by which the subsequent price rise can take place. Either a

onetime price hike or over the years a steady increase in price. None of these

methods are foolproof. To overcome this situation the manufacturer can keep the

short-term and long-term price the same and introduce introductory discounts

instead. In this way the customer is aware of the price of the product and is also

eager to seize the introductory offer.

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PRODUCT-MIX PRICING STRATEGIES

The strategy for setting the product’s price often has to be changed when the product is part

of a product mix. In this case the firm looks for a set of prices that maximizes the profit on

the total product mix. Pricing is difficult because the various products have related demand

and cost and face different degrees of competition:

Product Line: Setting price steps between product line items (for example. Honda Civic is

implementing product line pricing strategy for their cars as they are offering different

models of same line for different prices with different features)

Optional Product: Pricing optional or accessory products (for example. If a person buys a

new Nokia’s 6600 cell phone and if he also tends to pay extra amount of money for the

memory card inside of it than it is optional pricing for that product…..or another example

can be a person buying a personal computer and paying extra amount of money for the video

card inside of it…)

Captive Product: Pricing products that must be used with the main product (for example.

Colgate offering its toothbrush along with its toothpaste….or Gillette offering set of

additional blades with its razors)

By-Product: Pricing low value by product to get rid of them (for example. Many companies

obtain soap during the refining process of cooking oils and then manufactures beauty soaps

and sells it along with the cooking oils as their by-products…. As Unilever is obtains Lux

through Dalda)

Product Bundle: Pricing bundles of products sold together (for example Nescafe is offering

its coffee along with its cup for 100 rupees thus their offer is similar to product bundle…

besides that different combo deals of KFC which includes different offerings under one

state is also an example of product bundle pricing)

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PRICE ADJUSTMENT STRATEGIES

A company usually adjusts their basic prices to account for various customers’ differences

and changing situations. Here we examine the six price adjustment strategies.

1) Discount & Allowance: reduced prices to reward customer responses such as paying

early or promoting the product. (For example. Different seasonal or occasional offers of

Nike or Chen one offering certain discount on different range of shopping)

2) Discriminatory: adjusting prices to allow for differences in customers, products, and

locations (for example. Price of Pepsi in Pearl Continental Hotel as it is much higher than its

actual value in the hotel just because of the segment and environmental change in this case

the cost is the same but according to the segment pricing is different)

3) Psychological: adjusting prices for psychological effects. Ex: $299 vs. $300 (for

example. English toothpaste reduced its prices from 12 to 10 just to attract their customers

and increase their sales in this way they implemented physiological pricing strategy besides

that different offers in the market pricing like just 99 rupees or 999 rupees in various stores

is also physiological pricing strategy.)

4) Value: adjusting prices to offer the right combination of quality and service at a fair

price. (For example a person shopping in Zainab market might seek value and quality at fair

price. This process helps to deliver value and satisfaction to customers.)

5) Promotional: temporarily reducing prices to increase short-run sales. (For example.

Pepsi reduces its prices during the month of Ramadan and also offers different schemes and

similarly Warid Zem offers nights free offers to their customers)

6) Geographical: adjusting prices to account for geographic location of customer. (For

example. DHL charges different rates according to the destination)

FOB Origin Pricing: Geographical pricing strategy in which goods are placed free on

board a career, the customer pays the freight from the factory to the destination. (For

example. A person buying a compact disc from abroad in which he have to pay the

transport expense for bringing it in access)

Uniform Delivered Pricing: A geographical pricing strategy in which the company

charges the same price plus frightened to all customers, regardless of their location.

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( for example . every customer have to pay a similar and specified amount of money to

Nike if they are transacting from abroad)

Zone Pricing: A geographical pricing strategy in which the company sets up to or

more zones. All customers within a zone pay the same total price; the more distant

zone, the higher the price.( for example. If Adidas is transacting with its customers

from abroad regions then they will charge freight according to the distance of the

region and as the distance will increase freight charges will also increase.)

Basing Point Pricing: A geographical pricing strategy in which the seller designs

some city as a basing point and charges all customers the freight cost from that city to

the customer. ( for example. Dell computers established their basing point in India and

then delivers their products in the Asian regions charging freight from that region)

7) International: adjusting prices in international markets. (For example. Prices of Levi’s or

Nike might not be same in dolmen mall and in international stores…it will be definitely

differ according to the environmental offerings.)

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FIVE ELEMENTS OF PRICING STRATREGY

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V a lue Cr e a t i on - Value creation is the primary aim of any business entity. Creating

value for customers helps sell products and services, while creating value for shareholders,

in the form of increases in stock pr i c e, insures the future availability of investm e nt ca pi t a l

to fund operations. From a financial perspective, value is said to be created when a

business earns r e v e n u e (or a return on capital) that exceeds expenses (or the cost of capital).

But some analysts insist on a broader definition of "value creation" that can be considered

separate from traditional financial measures. "Traditional methods of assessing

organizational performance are no longer adequate in today's economy," according to

ValueBasedManagement.net. "Stock price is less and less d e te r m i n e d b y earnings or asset

base. Value creation in today's companies is increasingly represented in the intangible

drivers like innovation, people, ideas, and brand."

P ri c e stru c ture - Details of different pri c e s a nd discounts of fered on different o rd e r

sizes. The marketer is responsible for developing a pricing structure which is Proactive,

Consistent and Transparent. Only the will your customer trust your pricing policy and

pricing approach in the market.

P ri c e a nd V a lue Com m unic a t i on - Price and Value communication involves

communicating credibly, in monetary terms, the differentiating benefits of your product.

The goal, particularly for a higher-priced product, is to establish for the customer the

“value” identified during the value creation stage. Without that, you run the risk that the

purchasing department does not know the value of your differentiating benefits to their

company, or that they will not acknowledge the value, even if they do know what it is.

Once you have established the economic value, or at least have opened a discussion about

what it is, you no longer need to justify your price premium relative to the competition.

Instead, you can sell or promote your discount relative to the added value that you deliver.

Or, to describe value communication in the negative, you can show that your lower-priced

competitors are none-the-less overpriced because the savings from buying their products is

insufficient to compensate for the value lost by not buying your product! In order to

implement and execute a successful v a lue - b a s e d str a t eg y , it is critical that you address

value management—not just price management—systemically. Failure to include an

understanding of value in offer development and customer communication activities will

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result in a disconnect between what product teams are building, what marketing is

communicating, and what sales is selling, leading to fewer profitable sales and poorer

financial performance.

P ri c ing P ol ic y - The pol i c y b y which a c ompa n y d etermines the wholesale and r e tail

pri ce s f or its prod uc ts o r s e rvi ce s. The company needs to decide how much to charge to

what type of a customer.Whether the company wants to have a different pricing policy for

loyal customers or they want to have a single and consistent pricing policy for all its

customers. If the company plans to give discounts then on what basis they will calculate

the discount. Is it going to be on the basis of quantity purchased or dynamic pricing i.e

different price on different timings.

P ri c e S e t t ing – This is the final and the most important level in the pricig pyramid or

the most important element of pricing strategy. At this level, the company actually

determines the price of the product or service it is offering.

The pro c e ss of coming up with a c ost to c onsum e rs of a good or s e rvi c e p r odu ce d b y a

busin e s s . M a rk e t i n g ma n a g e rs of ten influ e n c e the pri c e s etting process for g oods a nd

s e rvi ce s that they help p romote, although the price level of a prod u c t is typically set based

on its prod uc t i on a nd dis t ribution c ost s , as well as the v a lue of the product perceived by

targeted consumers

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P ricing decisions for a product are affected by internal and external factors.

A. Internal Factors:

1. Cost:

While fixing the prices of a product, the firm should consider the cost involved in producing the

product. This cost includes both the variable and fixed costs. Thus, while fixing the prices, the

firm must be able to recover both the variable and fixed costs.

2. The predetermined objectives:

While fixing the prices of the product, the marketer should consider the objectives of the firm.

For instance, if the objective of a firm is to increase return on investment, then it may charge a

higher price, and if the objective is to capture a large market share, then it may charge a lower

price.

3. Image of the firm:

The price of the product may also be determined on the basis of the image of the firm in the

market. For instance, HUL and Procter & Gamble can demand a higher price for their brands, as

they enjoy goodwill in the market.

4. Product life cycle:

The stage at which the product is in its product life cycle also affects its price. For instance,

during the introductory stage the firm may charge lower price to attract the customers, and

during the growth stage, a firm may increase the price.

5. Credit period offered:

The pricing of the product is also affected by the credit period offered by the company. Longer

the credit period, higher may be the price, and shorter the credit period, lower may be the price

of the product.

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`6. Promotional activity:

The promotional activity undertaken by the firm also determines the price. If the firm incurs

heavy advertising and sales promotion costs, then the pricing of the product shall be kept high

in order to recover the cost.

B. External Factors:

1. Competition:

While fixing the price of the product, the firm needs to study the degree of competition in the

market. If there is high competition, the prices may be kept low to effectively face the

competition, and if competition is low, the prices may be kept high.

2. Consumers:

The marketer should consider various consumer factors while fixing the prices. The consumer

factors that must be considered includes the price sensitivity of the buyer, purchasing power,

and so on.

3. Government control:

Government rules and regulation must be considered while fixing the prices. In certain

products, government may announce administered prices, and therefore the marketer has to

consider such regulation while fixing the prices.

4. Economic conditions:

The marketer may also have to consider the economic condition prevailing in the market while

fixing the prices. At the time of recession, the consumer may have less money to spend, so the

marketer may reduce the prices in order to influence the buying decision of the consumers.

5. Channel intermediaries:

The marketer must consider a number of channel intermediaries and their expectations. The

longer the chain of intermediaries, the higher would be the prices of the goods.

Factors affecting pricing decision

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`Having a pricing objective isn’t enough. A firm also has to look at a myriad of other factors

before setting its prices. Those factors include the offering’s costs, the demand, the customers

whose needs it is designed to meet, the external environment—such as the competition, the

economy, and government regulations—and other aspects of the marketing mix, such as the

nature of the offering, the current stage of its product life cycle, and its promotion and

distribution. If a company plans to sell its products or services in international markets, research

on the factors for each market must be analyzed before setting prices. Organizations must

understand buyers, competitors, the economic conditions, and political regulations in other

markets before they can compete successfully. Next we look at each of the factors and what

they entail.

Customers

How will buyers respond? Three important factors are whether the buyers perceive the product

offers value, how many buyers there are, and how sensitive they are to changes in price. In

addition to gathering data on the size of markets, companies must try to determine how price

sensitive customers are. Will customers buy the product, given its price? Or will they believe

the value is not equal to the cost and choose an alternative or decide they can do without the

product or service? Equally important is how much buyers are willing to pay for the offering.

Figuring out how consumers will respond to prices involves judgment as well as research.

Price elasticity, or people’s sensitivity to price changes, affects the demand for products. Think

about a pair of sweatpants with an elastic waist. You can stretch an elastic waistband like the

one in sweatpants, but it’s much more difficult to stretch the waistband of a pair of dress slacks.

Elasticity refers to the amount of stretch or change. For example, the waistband of sweatpants

may stretch if you pull on it. Similarly, the demand for a product may change if the price

changes. Imagine the price of a twelve-pack of sodas changing to $1.50 a pack. People are

likely to buy a lot more soda at $1.50 per twelve-pack than they are at $4.50 per twelve-pack.

Conversely, the waistband on a pair of dress slacks remains the same (doesn’t change) whether

you pull on it or not. Likewise, demand for some products won’t change even if the price

changes. The formula for calculating the price elasticity of demand is as follows.

Price elasticity = percentage change in quantity demanded ÷ percentage change in price

When consumers are very sensitive to the price change of a product—that is, they buy more of

it at low prices and less of it at high prices—the demand for it is price elastic. Durable goods

such as TVs, stereos, and freezers are more price elastic than necessities. People are more likely 34

`to buy them when their prices drop and less likely to buy them when their prices rise. By

contrast, when the demand for a product stays relatively the same and buyers are not sensitive to

changes in its price, the demand is price inelastic. Demand for essential products such as many

basic food and first-aid products is not as affected by price changes as demand for many

nonessential goods.

The number of competing products and substitutes available affects the elasticity of demand.

Whether a person considers a product a necessity or a luxury and the percentage of a person’s

budget allocated to different products and services also affect price elasticity. Some products,

such as cigarettes, tend to be relatively price inelastic since most smokers keep purchasing them

regardless of price increases and the fact that other people see cigarettes as unnecessary. Service

providers, such as utility companies in markets in which they have a monopoly (only one

provider), face more inelastic demand since no substitutes are available.

Competitors

How competitors price and sell their products will have a tremendous effect on a firm’s pricing

decisions. If you wanted to buy a certain pair of shoes, but the price was 30 percent less at one

store than another, what would you do? Because companies want to establish and maintain loyal

customers, they will often match their competitors’ prices. Some retailers, such as Home Depot,

will give you an extra discount if you find the same product for less somewhere else. Similarly,

if one company offers you free shipping, you might discover other companies will, too. With so

many products sold online, consumers can compare the prices of many merchants before

making a purchase decision.

The availability of substitute products affects a company’s pricing decisions as well. If you can

find a similar pair of shoes selling for 50 percent less at a third store, would you buy them? The

merchants must look at substitutes and potential entrants as well as direct competitors.

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`In t ro du ct io n:

When the Dick and Mac McDonald opened their first restaurant in San Bernardino, California in 1948, they never could have imagined the extraordinary growth their company would experience. From modest beginnings, they found a winning formula selling high quality products quickly and low-cost. It was not until 1955 when Ray Kroc, a salesman from Chicago, became involved in the business that McDonald's really began to flourish. Kroc realized the same successful McDonald's formula could be exploited throughout the United States and beyond with the use of franchising. A franchise is an agreement or license to sell a company's products exclusively in a particular area, or to operate a business that carries that company's name.

In 1955, Kroc knew that the key to success was through rapid expansion; thus, the best way to achieve this was through offering franchises. Today, over 70 percent of McDonald's Restaurants are franchises. In 1986, the first franchised McDonald's opened in the United Kingdom. Now, there are over 1,150 restaurants, employing more than 49,000 people, of which 34 percent are operated by franchisees. Moreover, there are over 30,000 these r e s t au r a n t s i n more than 119 countries, serving over 47 million customers around the world. In 2000 alone, McDonald's served over 16 billion customers. For perspective, that number is equivalent to providing a lunch and dinner for every man, woman, and child in the world! McDonald's global sales were over $40 billion, making it by far the largest food service company in the world.

Now McDonald’s Corporation USA is the ninth most valuable brand in the world. In October 1996, McDonald’s opened its first Indian outlet in Vasant Vihar, an affluent residential colony in India’s capital, New Delhi. As of November 2004, McDonald’s has opened a total of 58 restaurants, mostly in the northern and western part of India. While McDonald’s opened 34 restaurants in five years (by 2001), 58 restaurants in eight years (by2004), it is now planning to add more than 90 new restaurants in the next coming years.Although the initial scenes of crowds lining up for days outside the McDonald’s restaurants in Delhi and Mumbai are no longer seen, Indian consumer response to McDonald’s products still remains very strong.

McDonald's India is a joint-venture company managed by Indians. McDonald’s India, a subsidiary of McDonald’s USA, has expanded its presence in India via 2 joint venture companies – Connaught Plaza restaurants and Hardcastle restaurants. McDonald’s (India) has a 50 per cent equity stake each in both joint venture companies. Connaught Plaza restaurants manages operations and expansions across North

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`India (Delhi, Jaipur and Punjab) – led by Vikram Bakshi – and Hardcastle restaurants, which is headed by Amit Jatia, manages operations and expansions across Western India (Mumbai)

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The growth of McDonald’s in India is not as rapid as in other countries. How did

McDonald’s do it? How did a hamburger chain become so prominent in a cultural zone

dominated by non-beef, non-pork, vegetarian, and regional foods such as chola bhatura,

kababs, bhaji, idli, samosa, dosa, vada, sambar, bhelpuri, and rice? The answer to this

question lies in McDonald’s carefully planned entry and expansion strategy in accordance

with India’s changing political, economic, and cultural landscape in the 1990s.

Six years prior to the opening of the first McDonald's restaurant in India,

McDonald's and its international supplier partners worked together with local Indian

Companies to develop products that meet McDonald's rigorous quality standards. Part of

this development involves the transfer of state-of-the-art food processing technology,

which has enabled Indian businesses to grow by improving their ability to compete in

today’s international markets. McDonald's constructs its restaurants using local architects,

contractors, labour and - where possible – local materials. McDonald's hires local

personnel for all positions within the restaurants and contributes a portion of its

success to communities in the form of municipal taxes and reinvestment.

The above aspects of McDonald’s do not get covered and highlighted by the news

hungry press. But when the false news of using beef allow in the French fries hit the

market, the press did not leave a chance to exaggerate it. Despite the fact that right

form the beginning; no beef ingredients have been used in any of the products in India.

The marketing agency of McDonald’s, Mudra comes to its rescue in such times.

The advertisements created by Mudra are a rage all over the nation, especially

amongst the children. Who can forget the little kid who gets nervous in the school

competition, but becomes happy again when his father takes him to McDonald’s?

McDonald’s India has tried not to leave any stone un-turned in its objective to

satisfy the Indian customer. But in Amit Jatia’s words, “Customers are generally not

forgiving.” According to the survey conducted, customers demand low prices, more

seating space, more variety, home delivery, and the list is endless.

The fundamental secret to McDonald’s success is the way it achieves uniformity

and allegiance to an operating regimen with proper marketing strategy. McDonald’s India

has to adhere to many rules and regulations laid down by the parent company, and it

still has to cater to the Indian customer and his needs. McDonald’s India is a case study

on how to mix conformity with creativity.

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2. PHILOSOPHY & VISION

Every company has a Vision or Mission Statement. A vision statement should

be short, clear, vivid, inspiring and concise without using jargon, complicated

words or concepts. It represents the corporation guiding principles. It subtly indicates

the businesses the firm will pursue and the customer needs it will seek to satisfy. The

vision statement also allows the employees to clearly adhere to the standards set up by

the business unit and work in as per the guidelines framed by the company.

2.1 M cDo na ld ’ s Vision S t at ement –

"McDonald's vision is to be the world's best quick service restaurant experience.

Being the best means providing outstanding quality, service, cleanliness, and value,

so that we make every customer in every restaurant smile."

The McDonald's philosophy of Quality, Service, Cleanliness and Value (QSC&V)

is the guiding force behind its service to the customers. McDonald’s India serves

only the highest quality products. All McDonald’s suppliers adhere to Indian Government

regulations on food, health and hygiene while continuously maintaining their own

recognized standards. All McDonald’s products are prepared using the most current state-

of-the-art cooking equipment to ensure quality and safety. At McDonald’s, the customer

always comes first. McDonald’s India provides fast friendly service- the hallmark of

McDonald’s that sets its restaurants apart from others. McDonald’s restaurants provide a

clean, comfortable environment especially suited for families. This is achieved through

McDonald’s stringent cleaning standards, carefully adhered to.

McDonald’s menu is priced at a value that the largest segment of the

Indian consumers can afford. McDonald’s does not sacrifice quality for value – rather

McDonald’s leverages economies to minimize costs while maximizing value to

customers. The main effort of McDonalds’s service is to make customer the whole sole

beneficiary through its stringent standards maintained all over the world.

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3. SW OT ANALY SI S

3.1 SW OT An alys is –

SWOT stands for strengths, weaknesses, opportunities, and threats. To meet the

needs of the key market it is important to analyse the internal marketing strengths

of the organisation. Strengths and weaknesses must be identified, so that a marketing

strategy which is right for the business can be decided upon. Once the strengths and

weaknesses are determined, they are combined with the opportunities and threats in the

market place. This is known as SWOT analysis. SWOT analysis is a tool for auditing an

organization and its environment. It is the first stage of planning and helps businesses

to focus on key issues. Once key issues have been identified, they feed into marketing

objectives.

S t rengths

• McDonalds has built up huge brand equity. It is the No. 1 fast-food company by

sales, with more than 31,000 restaurants serving burgers and fries in almost 120

countries. Sales, 2007 (11, 4009 million), 5.6% sales growth.

• Good innovation and product development. It continually innovates to

retain

customers in the business.

• The McDonalds brand offers consumers choice, reasonable value and great service

• Large amounts of investment have gone into suppo rting its franchise network,

75% of

stores are franchises.

• Loyal staff and strong management team.

• Advertisements and promotion to market the McDonalds’ as a brand carves a

strong image on customer’s mind.

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W e a k n e s s e s

•Core product line out of line with the trend towards healthier lifestyles for adults

and children. Product line heavily focused towards hot food and burgers.

• Locations of outlets are sometimes not to closer to storage centres resulting in loss

of quality.

• Seasonal.

• Quality issues across the franchise network.

• Break-even sales can be generated after operating for certain number of years only.

O ppo r t un i t i es

• Joint ventures with retailers (e.g. supermarkets).

• Consolidation of retailers likely, so better locations for franchisees.

• Respond to social changes - by innovation within healthier lifestyle foods. Its

move into hot baguettes and healthier snacks (fruit) has supported its new

positioning.

• Use of CRM, database marketing to more accurately market to its consumer

target groups. It could identify likely customers (based on modelling and

profiles of

Shoppers) and prevent brand switching.

Strengthen its value proposition and offering, to encourage customers who visit coffee

shops into McDonalds.

• Installing children’s play-parks and focus on educating consumers about

health,fitness.

• Continued focus on corporate social responsibility, reducing the impact on the

environment and community linkages.

• Expansion into emerging markets of cities present in India.

•Focus on middle-class income group customers with low-priced quality goods will

enhance the profit margin.

• Senior Citizens have been totally deprived of marketing strategy adopted by

McDonald’s. The burgers and eatables are more Indianized so that senior citizens find it

familiar but the introduction of more milky beverages would attract more senior

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citizens.

T h rea t s

•Social changes - Government, consumer groups encouraging balanced meals, 5 a day

fruit and vegetables.

• Focus by consumers on nutrition and healthier lifestyles.

• Competitive pressures on the high street as new entrants offering value and greater

Product ranges and healthier lifestyles products. E.g. subway, supermarkets, M&S.

• Recession or down turn in economy may affect the retailer sales, as household

Budgets tighten reducing spend and number of visitors.

• Pressure groups - environmental.

•Since McDonald’s is a symbol of American cultural imperialism, it continues to face

continue opposition from religious fundamentalists, protectionists, animal rights activists,

and anti-globalization protestors.

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PRICING STRATEGY ADOPTED BY MC DONALDSPricing is the only mix which generates a turnover for the organization. The

remaining 3p’s are the variable cost for the organization. It costs to produce and design a

product; it costs to distribute a product and costs to promote it. Price must support these

elements of the mix. Pricing is difficult and must reflect supply and demand relationship.

PENETRATION

SKIMMING

COMPETITION

PRICING STRATEGY

PRODUCT LINE

BUNDLE

Psychological

The customer's perception of value is an important determinant of the price

charged. Customers draw their own mental picture of what a product is worth. A product is

more than a physical item; it also has psychological connotations for the customer. The

danger of using low price as a marketing tool is that the customer may feel that quality is

being compromised. It is important when deciding on price to be fully aware of the

brand and its integrity. A further consequence of price reduction is that competitors

match prices resulting in no extra demand. This means the profit margin has been reduced

without increasing sales.

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Worldwide, McDonald’s has achieved success by tapping middle-class

households. But in India, while McDonald’s has been able to get a larger share of rich

and upper-middle class population, it has not been as successful at effectively tapping

the middle-class and lower middle-class segments. Capturing the latter segment is

critical as McDonald’s starts entering into smaller cities. But this section has mainly

stayed away because of a widely prevailed perception that McDonald’s is expensive. This

is the reason why the company cut prices on its vegetable nuggets from Rs 29 to Rs 19

and the soft service ice cream cone from Rs 15 to Rs 7 in 1997. In September 2001,

McDonald’s offered its enormously popular shudhshakahari (pure vegetarian) Veg

Surprise (a veggie burger) for Rs 17. With this price, McDonald’s was able to sell

the veggie burger 40% more than what it expected within a month between September

and October of 2001. In March 2004, McDonald’s launched a Happy Price menu under

which it sells four of its burger products at Rs20 each. This has led to a 25% increase in

customers. Clearly, the McDonald’s strategy has been to increase sales volume of its

products by making its products available at an affordable price.

A very popular punch line of McDonalds - “Aap ke zamane mein, baap ke zamane

ka daam”. The main reason of this price strategy was too attract the middle class & the

lower class of people in India. After this not only the upper class prefers going there but

all class of people go there. The company strives to differentiate itself from other fast food

restaurants by offering a variety of menu items that appeal to a variety of people from

those who just want great burgers, to those who just want a quick healthy meal.

Value Pricing

Happy meal – Small burger, French fries, Coke + Toy

Medium Meal Combo- Burger, French fries, Coke-Veg Rs: 75, Maharaja Mac

MealRs:95

Family Dines under Rs: 300

Prices lower than Pakistan, Sri Lanka, and 50% lower than U.S.

The most important reason for McDonald’s pricing flexibility is its well-established

supply chain arrangement, which ensures efficiency and speed in distribution. Besides,

huge increases in volume sales and food processing technology have been helping the

company to offset its cost.

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CONCLUSION

McDonald's marketing mix is strategic because of the diverse approaches that

are used. First, in identifying the "four P's" of marketing addressed earlier (product, price,

promotion, and placement), research shows that McDonald's is very careful in making

decisions that effect each area and/or how each area effects the other. McDonald's

is concerned about how the firm will fulfil the needs and wants of its customers and in the

activities associated with maintaining the r e l a t i o n s h i p s w ith its stakeholders. McDonald's

stakeholders include customers, franchisees, suppliers, employees, and the local

communities surrounding them.

McDonald's has shown care for customers through the decisions to add more

healthful foods to the menus, by changing how products are packaged or how foods are

prepared, and by philanthropic contributions and sponsorships. Local adaptation, no

doubt, has contributed to McDonald’s business growth in India. The restaurant

has developed competitive advantages in the industry of serving quality fast food at a

low cost. In addition to these decisions, the development of the Golden Arches or Ronald

McDonald has provided consumers with memorable icons that are associated with

quality, service, and value, just like the McDonald brothers and Ray Kroc intended.

McDonald's faces some difficult challenges in moving away from the fast food

king to a more health conscious provider for customers who care about what they eat. The

keys to its future success will be maintaining its core strengths-an unwavering focus on

quality and consistency-while carefully experimenting with new options. The company's

environmental efforts, while important, should not overshadow its marketing initiatives.

Though there are many opportunities for this fast food giant, McDonald's must keep the

strategic nature of its marketing efforts to stay on top and provide what customers want.

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