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McDonald’s Segmentation Marketing INT-640 Instructor – Dr. J. Torres Abstract The McDonalds strategic marketing approach, employing segmentation management, versus competitor’s use of product/brand management, is examined. Profiles of segmentation targeted customers are presented, along with details of methodology used for segmentation variances. Introduction Marketing segmentation is the practice of partitioning targeted consumers into factions which share distinct socially interactive similarities, in particular those whose behavioral and needs-based actions differentiate them from the mainstream populous, yet remain analogous within the subdivided grouping. These collections are referred to as segments, and can be readily identified as dissimilar and unique (Cateora, Gilly, & Graham, 2013). Segmentation marketing occurs along two different axes; horizontal differentiation and vertical differentiation. Both are distinguished from product differentiation. Product differentiation discriminates products in an effort to utilize competitive advantage. Horizontal differentiation is based on consumer needs, which are recognized individually. Vertical differentiation is based on consumer desires; these are more universally recognized (Petryni, 2015). Segmentation can be delineated according to a myriad of characteristics, e.g. geographic, demographic, and cultural/behavioral characteristics. Geographic segmentation examines locational data, and may comprise information about weather, terrain and population statistics. Demographic segmentation looks at variances in gender, age, ethnicity, etc. Cultural/behavioral segmentation inspects differences based on social conducts and norms as considered appropriate for the group (Wikipedia, 2015). McDonald’s Competition McDonald’s segmentation strategy has evolved over the years in an effort to compete with other food service establishments such as Starbucks and Dunkin Donuts. These restaurants offer expedient and opportune service of a more desirable and healthy food selection, e.g. salads, sandwiches and especially quality coffee as well as other drinks. While Starbucks focus is on coffee, their segmented marketing approach places emphasis on the upscale urban audience, vying for those consumers seeking ease and solace over convenience (Mourdoukoutas, 2015). Dunkin Donuts has also begun to target the trend-seeking and trend-setting segments with premium coffee drinks, as well as a selection of nutritionally dense breakfast items. Dunkin Donuts restaurants also aim for those consumers that are price sensitive, seeking advantage of economic conditions (Lim, 2015). Each of the three restaurants offer myriad locations, with McDonalds in 118 countries operating over 35,000 restaurants (Wikipedia, 2015), 21,366 Starbucks ( (Statista, 2015), and Dunkin Donuts offering more than 11,300 establishments in 37 different nations (Dunkin Donuts, 2015). Each of the three restaurants are breakfast food rivals, with McDonald’s escalating it’s McCafe positioning in this venue, both McDonald’s and Dunkin Donuts are perceived as being price conscious as opposed to Starbucks, which is seen as the most costly of the lot (Glover, 2015). McDonald’s Target Customer Profiles McDonald’s targeted customers are sorted according to various segments. The main targeted customers are parents with younger children, young children, business customers and teens. These can be sub-segmented into demographic groups, which may include, among others, mainstream domestic, African American, Asian American, Latino, women (particularly single moms) and millennials. Because of the wide variety of segments that offer a great deal of diversity, McDonalds must petition an extensive and inclusive audience. With their traditional menu offerings of burgers and chicken sandwiches, salads, soft drinks and milk shakes, some items have currently undergone alteration to provide an appeal to the more health-conscious outlook being comprehensively considered by most consumers (123 Help Me, 2015). In order to differentiate these segments, profiles of consumers are established that are both horizontal and vertical. The following examples illustrate how these might appear: Parents with younger children – This group of consumers are sometimes occasioned with myriad issues, such as adopted children, unmarried/separated/divorced parents and those experiencing poverty However, overall the typical young family will be median income earners, mobile, and in the case of many, health-conscious. Mainstream domestic consumers in this group will be targeted with features such as ecologically balanced offerings, e.g. sustainable and certified fish and sirloin burgers. Culturally distinct groupings will be attempted to these healthy alternatives as well. Single moms and millennials are also often notoriously health conscious, and will recognize these as positive attributes (Child Trends, 2015). Young children - Young children are learners, working to absorb new words and concepts. Young children are frequently comprehensive in nature, irrespective of culture. In current society they are exposed to a great deal of televised advertising, and almost universally recognize brands that are seen during viewing. The Happy Meal is ubiquitously known among kids around the world. In an effort to appease health conscious parents, fruits such as apples and orange slices are offered as substitutes for French fries. Yogurt is a replacement for the cookies that were classically included in the boxed meal, and fruit juices and milk as alternatives for soft drinks. As young children are very active with high energy levels, playgrounds that allow climbing, crawling and other moderately strenuous activities are typically included at restaurant locations. It should also be noted that McDonald’s set the standard of including promotional toys with children’s meals, which are typically co-branded. For ages under three alternative toy selections are available secondary to safety concerns (McDonald's, 2015). Business customers – The average business customer will have a disposable income, be educated, and often hurried as a result of tight schedules The demographic segment is diverse in terms of gender, ethnicity, and cultural background. Ages range from 22-65, with a variety of professional pursuits. In an effort to attract and retain these adult consumers, lighter and healthier food offerings are replacing traditional fat-laden foods at McDonald’s. The franchise firm is attempting to lure business customers with foods that are fresh, organic and sustainable. Advertising is geared toward information which provide U.S. Department of Agriculture guidelines for dietary recommendations, and include sample menu suggestions which are based on gender, age, weight and daily physical activity levels. Breakfast and lunch meals are most often consumed by business customers (McDonald's, 2015). Teens – Teens represent the most dependable and at the same time difficult of McDonald’s targeted segments. Teens of both genders are increasingly mobile, active, and notoriously hungry secondary to growth spurts that occur during adolescence. Millennial teens are distinguishing themselves from their historic contemporaries, however, as they are yet another modern segment focused on health considerations. Fewer hamburgers are being consumed by today’s teens than were by Generation X or Baby Boomer youngsters. They have been described as self-interested and entitled, and yet at the same time open-minded and conscientious. Advertising which includes trendy music and images of youths enjoying McDonald’s food while engaging in vigorous and energetic activities is the predominant integrated marketing communications for the teens segment (Young, 2015). Conclusion McDonald’s use of segmentation marketing is hoped to turn around a series of failures that have resulted in decreased earnings over the past few years. Problems with employee staffing complaints about wages and public health concerns have plagued McDonald’s for several years. A segmentation marketing management approach versus a product/brand approach can offer differentiation from competitors that will bring an advantage within the global marketplace and may provide a successful outcome. Works Cited 123 Help Me. (2015, June 7). McDonald's Case Study. Retrieved from 123 Help Me: http://www.123helpme.com/mcdonalds-case-study-view.asp?id=166353 Cateora, P. R., Gilly, M. C., & Graham, J. L. (2013). International Marketing. New York: McGraw-Hill Irwin. Child Trends. (2015, June 7). Family Stucture. Retrieved from Child Trends Data Bank: http://www.childtrends.org/?indicators=family-structure Dunkin Donuts. (2015, June 7). Company Snapshot. Retrieved from Dunkin Donuts: http://www.dunkindonuts.com/dunkindonuts/en/company.html Glover, K. (2015, June 7). Starbucks, Dunkin' Donuts, McDonald's: Coffee Rivals Fight Breakfast War. Retrieved from CBS News: http://www.cbsnews.com/news/starbucks-dunkin-donuts-mcdonalds-coffee-rivals-fight-breakfast-war/ Lim, P. J. (2015, June 7). Dunkin’, Mickey D’s, or Starbucks? The Surprising Winner of the Coffee War. Retrieved from Money: http://time.com/money/3028578/dunkin-donuts-mcdonalds-starbucks-coffee-wars/ McDonald's. (2015, June 7). A Balancing Act. Retrieved from McDonald's: http://www.mcdonalds.com/us/en/food/food_quality/nutrition_choices/balancing_busy_lives/a_balancing_act.html McDonald's. (2015, June 7). McDonald's Introduces Fresh, Whole Fruit Option In Happy Meals. Retrieved from McDonald's Newsroom: http://news.mcdonalds.com/US/releases/McDONALD%E2%80%99S-INTRODUCES-FRESH,-WHOLE-FRUIT-OPTION-IN Mourdoukoutas, P. (2015, June 7). Starbucks And McDonald's Winning Strategy. Retrieved from Forbes: http://www.forbes.com/sites/panosmourdoukoutas/2013/04/25/starbucks-and-mcdonalds-winning-strategy/ Petryni, M. (2015, June 7). What Is Horizontal Differentiation? Retrieved from Chron: http://smallbusiness.chron.com/horizontal-differentiation-23703.html Statista. (2015, June 7). Number of Starbucks stores worldwide from 2003 to 2014. Retrieved from Statista: http://www.statista.com/statistics/266465/number-of-starbucks-stores-worldwide/ Wikipedia. (2015, June 7). Market segmentation. Retrieved from Wikipedia The Free Encyclopedia: http://en.wikipedia.org/wiki/Market_segmentation Wikipedia. (2015, June 7). McDonald's. Retrieved from Wikipedia The Free Encyclopedia: http://en.wikipedia.org/wiki/McDonald%27s Young, A. (2015, June 7). McDonald’s Has A Millennial Problem: Young Consumers Not As Interested In Big Macs As Their Parents. Retrieved from International Business Times: http://www.ibtimes.com/mcdonalds-has-millennial-problem-young-consumers-not-interested-big-macs-their-parents-1148425