New product launch: McDonald’s Pineapple Flavoured Tea in Australia
This report will cover the various marketing aspects required to be covered at the time of launching a new product. The report will provide a detail about the launching of new product i.e. Pineapple Flavored Tea by McDonalds in Australian market. The analysis includes evaluation of micro factors, macros factors affecting the business and industry. For that PESTEL, SWOT, Porters Five forces analysis has been done for understanding the environment surrounding the business. Based on the analysis, marketing strategies of McDonalds like its marketing mix, segmentation; targeting, positioning strategies etc. have been formulated for making the launch of product a success.
The renowned fast food organisation McDonald’s is an American company which was established in the year 1940 in the form of a restaurant with Maurice McDonald and Richard as its founder at San Bernardino in California (US). They commenced the business as hamburger stand which later on transformed the organisation into franchise; along with introduction of Golden Arches Logo is the year 1953 at Phoenix, Arizona. In the year 1955, a new businessman, Ray Kroc, joined the organisation as agent and later on bought the chain from McDonald brothers. The original headquarter of McDonalds was Oak Brook, Illinois, however, its worldwide headquarter was shifted to Chicago in 2018 (Saifullah et. al, 2014).
McDonalds could introduce a new flavored i.e. Pineapple flavored tea in Australia. The target is to gain maximum attention of public for this new flavor tea in the market. The promising business opportunities in introducing this new product would help the organization in extending its product line.
Since, McDonald is required to introduce a new product in the existing market and there is a necessity of effective publicity of this new flavored tea for which McDonald is required to perform a detailed study of the market and adopted suitable strategy for this new product. For instance, McDonald is required to apply both above and below line advertising for gaining attention of media for covering large market (Ahmed et al., 2014).
The Australian market of fast food industry is rising at a reasonable pace. An approx. earning of the fast food segment in the market is around 6.6 billion $. This shows that the fast food segment has a big market presence in Australian economy and it is going to expand more and grow more through introducing new products which would be preferred and liked by the people of Australia. Apart from that, the fast food market in Australia is highly competitive with the presence of many big brands like KFC, Pizza Hut etc. which has increased the number of offerings in the market which has provided many choices to customers to select from. Also, as per a report more and more global firm are looking for commencing business in Australia which would further intensify the competition in the industry (Khoso, Ahmed and Ahmed, 2014). Hence, it is clear that the past trend shows attractive business scope for the proposed pineapple flavoured tea in Australia which will continue with the consistent standard healthy eating habit of people.
McDonald’s menu has various fast food products along with soft drink like salads, fries, chicken items, burgers, ice cream and more. There are various McDonald’s outlets that have also included a play zone for kids and their advertisements also channelized towards children. Some outlets have redesigned into ‘natural’ style providing a place for comfort through including fireplaces, lounge areas and reducing hard tables and chairs made of plastic. The foundation on which the company was formed is still continuing today through the vision of the organization and level of commitment of its staff which would make the organization grow in future also (Vitasek, 2016).
Through its marketing strategy McDonalds has become one of the most valued brand of the globe. After Coca-Cola, hamburgers are the most popular American food served around the globe. Brand McDonald has brought revolution in the fast food segment which has impacted the life of both people producing the food and people eating the food.
Desires of customers are the main driving force for the business of McDonalds. Each day around fifty four billion consumers are served at various McDonalds outlets around the world. Since, majority of customers of McDonalds belong to young generation, hence, company is very much concerned with the likings and disliking of this generation (foxworth, 2013). Because of this reason, demand of customers, their likings, their choice and everything has impact on the strategy of McDonalds.
For the new proposed pineapple tea flavour there is hardly any direct competition in the market. But, similar offerings of Costa Coffee, Nero Café, Starbucks etc. and some more competitors possess a kind of direct completion for McDonalds.
The indirect competitors for McDonalds are Dominos, Pizza hut etc. which has other offerings in fast food segment and targeting the same customers with different offerings.
Strength of promotion: McDonald’s brand image makes its promotional strategy more effective which would help in promoting the new offering also.
Market share: The large market share of McDonald in fast food segment shows the large customer base of the company. This would assist the organization making less effort for making people try new offering (forbes, 2015).
Apart from above, the brand image of McDonalds as a brand making efforts for reducing wastage and towards green world has helped it in gaining a positive public image. Also, the organization has been rated as the best supply chain operator last year.Moreover, the specific marketing strategy at the time of launching new product of McDonalds has made it a leader in the fast food business. The service of home deliver has provided it a competitive advantage in the market.
McDonald’s profit margin is reducing through the rising labor and raw material prices which would impact the new offering pricing. Also, launching a new product by McDonald’s with no past experience of such product could make McDonald face new challenges. There were also instances in the past, where companies were failed in ensuring quality check at its franchise outlets which has degraded the image of the company. Earlier also, launching of some innovative products has been a fail.
McDonald could expand its operations to new locations which are still unexplored and could be targeted effectively. Launching of a new flavored tea before competitors would provide early mover advantage to McDonald. The ratio of consuming tea is rising among consumers in Australia which is a positive sign for new proposed product. Special promotional campaign at college or school or university level would help the organization in targeting maximum customers (Andrea& Silvia, 2014).
Being an established brand, people are ensured about the quality of product and with good taste the new product could provide wonderful results to the organization. Also, the growing awareness about benefits of consuming tea among people offers opportunities to market the new product as good for health and full of taste.
One major threat before the company for launching the product is failure of product in the market. The company afraid of this as any such product failure has negative impact of the hard earned brand image of the organization. Also, the recent economic slowdown in the economy possesses challenge to fast food industry which might affect the launch of new product and expected revenue from it (Scott, 2012).
It would be difficult to divert people to try new product of different brand as people are already used of their own brand like Coffee cafes etc. The rising prices of tea around the world also possess threat to the new product launch.
POLITICAL AND LEGAL FACTORS
Recently, there have been various disputes regarding pricing of tea leaves as well as payment of prices to farmers. For launching the proposed product McDonald is required to ensure the timely supplies which would make the product a success for that the suppliers must be dependable. The fair trading laws are required for smooth conduct of business. Also, the remuneration paid to labor is a matter of concern for government (Sidra&Attiya, 2013). Apart from those taxations rules, corporate laws would also affect the proposed product development.
In Australia, the idea of branded flavored tea is not so common among fast food service providers and in normal course tea is offered along with milk. However, the proposed product would be offered as leisure and would be opposite to the image of traditional tea. The new product would be a fruit based product provided in the form of tea bags that could be carried anywhere (Stephan& Andreas, 2015). Apart from that, the new product would also provide nutritional value in comparison to conventional milk base tea which would help in fulfilling the growing concern of people for nutrition. Although, it would be very challenging to launch a ‘pineapple flavored tea’ as Australian people might resist change and might not be ready to bring changes in their ideology of consuming tea.
Post recovery from time of recession there has been rise in the per capita income of Australian people. McDonald is targeting the young generation mainly belonging to middle and lower income, which are the groups whose composition is maximum in the total population. Consumers in this segment are ready to pay up to medium price for a distinct and innovative product. The young generation of Australia is also in some sort of part time work who would like to have an offering that would not just provide refreshment but would also provide nutritional values.
The role of technology in fast food industry has increased many folds. Technology has taken the expectation of consumers to the next level. All organizations in fast food industry are utilizing technology for improving their service to customers like through online order tracking, online billing, online payment etc. Technology is involved in all workings in fast food industry. McDonalds, too is using advance technology for making the experience of customers richer and soothing (Hebden et al., 2011).
Supplier’s bargaining power:
In normal course, the suppliers in fast food sectors have low power to bargain from large fast food chains as there are various suppliers in the market and most of which are unorganized and have small businesses. Also, in the case of McDonalds, its list of suppliers have suppliers spread across the world which further lower down their power to bargain. But, in cases when suppliers have access to some unique resource in those cases the power of suppliers is high even in fast food segment (Dunn et al., 2015).
Customer’s bargaining power:
In this industry, although the customers are individual customers but they enjoy huge bargaining power collectively. Apart from that the rising competition in the market also, increases the bargaining power of customers. In fast food business the bargaining power is not reflected through direct dealing with customers but in fact could be noticed by their behavior like shifting to other brand with fewer prices etc. Also, the players in the industry are targeting the same set of customers. The similar offering from different brands further increases the power of consumers. Because of growing importance of consumers McDonald’s and other players are offering various promotional offers to their customers for staying together with the brand for longer duration.
Threat from substitutes:
The threat from substitute products in fast food business is moderate. There are already many reputed brads in the market offering similar offerings to the same base of customers. There is also competition from other local brands. But, this threat is managed through effective marketing strategy used by reputed brands and their global market presence. Any new substitute product could affect the MacDonald’s for a small duration only because of its brand image and wide market coverage (Fraser et al., 2010).
Threat from new entrants:
The threat from new entrants in fast food industry is moderate, since the industry has no specific barriers for new comers. Although, giving fight to already established brands is not an easy job for new players. Also, establishing a global fast food chain requires huge marketing efforts and high level investment at initial level which further increases the barrier level for new entrants. The skill set of employees of established brand like McDonald and their strong marketing teams also possess challenge to new organizations.
Level of completion among existing brands:
The fast food industry is full of reputed brands. Further the tea business as its own set of expert competitors. All these make the competition more severe. Companies are finding ways for luring customers to try their products. Introducing new product is the only way before companies for achieving growth in their business but same rule applies to all payers in eth industry. McDonald competitors are burger kind, Dominos, pizza hut etc. Apart from that the competitor for proposed flavored tea are Starbucks, and other reputed cafe brands. This makes it necessary for McDonalds to devise effective marketing strategies for making the launch of new product a success for its business (Helms & Nixon, 2010).
Pineapple flavoured tea will segmented as per geographic requirement of consumers. In Australia the organization will focus on people who prefer health and benefits. With respect to demographic segmentation, the Australian market will be segmented demographically as gender, income, age, size, religion, family, occupation, race and religion. McDonald’s will concentrate on the age group 12- 60. Both females and males can have the new product. Big and small families all will be welcomed.
Separating a marketplace into diverse groups on the basis of lifestyle, personality and social class characteristics present psychographic segmentation. Pineapple flavoured tea market will be divided basically on psychographic variables such as:
- Upper and Middle class
- Lifestyle is not specific.
- Personality is ambitious and authoritarian
Density All cities in the distribution network
Age General Population over 12
Income 15000/- & above per annum
Social class Lower middle class, Middle class, middle-upper class, upper-upper class
Life style Value oriented, sociable and active, actualizers,
Occasion Regular occasion.
Benefits Quality, economy, nutrition.
User status Non user, potential user, first time user
Usage rate Light and medium
Loyalty status Tea and pineapple lovers
McDonald has great experience of working in the food sector across the world (McColl-Kennedy, Yau& Kiel, 2010). In order to launch its new product,i.e. Pineapple flavoured tea. This product will be the combination of simple tea and pineapplefruit flavour.
Main target of the McDonalds in case of Pineapple flavoured tea is families as well as teenagers.
Pineapple flavoured tea has easy usage which can be considered and taken as normal tea or anyone can drink it for nutritional value to get vitamins A and C, iodine, folic acid and calcium.
It presents the selection of marketing mix and strategies which are most appropriate for target consumer segment. In case of Pineapple flavoured tea positioning will be attained through use of marketing mix Product, Place, Promotion and Price. In general, for product positioning, the organization uses adaptive kind of positioning. In this case of Pineapple flavoured tea also the organization is involved in re-positioning of services as well as products (Ali, 2014).
It is expected that, the positioning strategy of Pineapple flavoured tea of McDonalds will be outstanding. McDonalds is developing an image which will be unique in the mindset of customers. McDonaldswill use to enhance alternate positioning tactics for differ targets.
The organization is positioning itself to be a low cost as well as family friendly in flavoured tea. In this case of Pineapple flavoured tea McDonalds has ahuge scope for customers with low cost strategy. With Pineapple flavoured tea McDonalds will be positionedwhich;
- Develops Brand Image
- Creates Demand
- Creates Demand
- Creates Value In the Mind of Customer
- Commands Premium Price
Pineapple flavored tea is an instant tea which is a flavored drink which will be consume hot. The Pineapple flavored tea has fresh and flavored extracts as well as several nutrients. The product is featured with enhanced variety too which is aimed to worked as a marketing variable i.e. different flavor like grape, plum, peach with Pineapple flavor. These flavors are derived from fresh and healthy fruits. This taste of Pineapple flavored tea will be a new and enhanced drink for pineapple and tea lover. The pineapple tea would be a different drink in the target market. The product will be liked by the people who are conscious of heath as well as nutritional values. This is a main feature of the product to offer tea with flavor and nutritional value. The ingredients of the tea involve proteins, rose hips pineapple pieces, passion fruit pieces, liquorices root, calcium and hibiscus. As it is taken in the hot form, it would be consumed in the Australian market especially in cold weather of Australia (Purdy, 2017). This product will be a substitute for local brands of hot tea in the Australian market. At the same time the product i.e. ‘Pineapple flavored tea’ will be a substitute of flavored drink which is already marketed in Australian Market. The aim of the McDonalds by providing flavored tea is to offer a perfect tea with high quality without composition of any artificial flavor.
One of the most crucial parts of this marketing mix is packaging of Product. The packaging will be in different colored cups. Original Pineapple flavored tea will be packaged in yellow cup. As per strategy if any consumer wants grape, plum, peach flavor, these can be mixed instantly in different color cups. The cups will be made of eco-friendly material. Packaging of the product will be attractive and appealing.
Pricing is a major element of marketing mix of a company that requires to be administered carefully for providing value to the customers. The price of proposed pineapple flavored tea would be finalized based on performing a survey in the market. Since, a differentiation strategy is followed by the company; hence the price of flavored tea would be kept medium for making people taste its innovativeness, uniqueness, high quality that too at a convenient place like McDonalds. Such reasonable pricing would help in increase in volume sales which would result in better financial performance. The price would be kept competitive in the market for raising the market share. Offering the tea at low price would make the tea competitive for local tea which is not the aim of company. Hence, the pricing strategy would be skimming for first attracting the attention of health conscious people who are ready to pay higher for a healthy product (Cattani, Porac and Thomas, 2017).
The methodology of setting price for proposed tea will be markup price under which the price will be derived after calculating the cost plus profit margin for covering the cost of investment and a reasonable profit margin. Hence, after considering all these points the price of proposed tea would be kept around $ 2 per cup.
Proposed flavored tea would be available to the people of Australia through all outlets of McDonalds in the country. McDonald will use its huge distribution system for making new flavored tea available for all.
The promotion strategy for proposed tea would be through advertisements and sales promotion. Aggressive promotion will be done initially to make people aware of new product. The advertisement would also provide detail of nutritious benefit of proposed tea.
In promotional strategy of a company advertisements play a crucial role in developing a long run relationship with the brand. With the rise in number of options, it has become compulsory for brands to create differentiation in the market and for that advertising is an effective tool (Dess, McNamara and Eisner, 2016). In this line, for the proposed flavored tea McDonald will use both above the line as well as below the line advertising along with below mentioned factors-
|ABOVE THE LINE ADVERTISING
|Television: Various TV channels, mainly on sports channels.
RADIO: Local Radio channels of Australia
|BELOW THE LINE ADVERTISING
|NEWSPAPERS: Reputed national newspaper
MAGAZINES: Sports magazines, health magazines. etc.
|BILLBOARDS||Billboards are everywhere like at airports, shopping malls and mostly at all places where McDonald is located. Hence, all outlets of McDonalds would have this new product occupied the major space on billboards. This would help in attracting attention of commuters.|
|McDonald has planned to perform sampling of proposed tea at colleges, shopping malls and universities for promoting the product.
|TRADE SHOWS AND CONCERTS
|Company could promote the product at major trade shows or concerts for making people aware of the new offerings.|
|THROUGH WEBSITE||The new flavored tea would be pictured at front page of the website of the company. Also, the new product would be featured on from page of the company account on social media as well as mobile application. This is the most effective way of promoting the product to online users.|
Introducing any new product in the market requires an in depth study of the market which includes an analysis of both internal factors as well as external factors. On the basis of analysis through PESTEL, SWOT, Porters Five, it is clear that proposed pineapple flavoured tea offers huge business opportunity to McDonald because of its unique taste. With the use of suitable marketing strategies company could expect attractive profit figure through launching this new product.
- Ahmed, R.R., Ahmad, N., Parmar, V and Khoso, I. (2014), “Role of Packaging and Labeling on Pakistani Consumers Purchase Decision”, European Scientific Journal, Vol. 10 (16): 464-473
- Ali, S. (2014). Fast Food consumption in Pakistan. Retrieved from brandsynario.com: http://www.brandsynario.com/fast-food-consumption-in-pakistan/
- Andrea, Z. B., & Silvia, V. (2014). What about Strategic Options? Lessons from Fiat’s Turnaround. International Journal of Business and Social Science .
- Cattani, G., Porac, J. F. and Thomas, H. (2017). “Categories and Competition.” Strategic Management Journal1: 64–92.
- Dess, G., McNamara, G. and Eisner, A. (2016). Strategic management. New York: McGraw-Hill Education.
- Dunn, K. I., Mohr, P. B., Wilson, C. J., &Wittert, G. A. (2015). Beliefs about fast food in Australia: A qualitative analysis. Appetite, 51(2), 331-334.
- (2015). Retrieved april 12, 2016, from Steve forbes Corporation Websites: http:www.forbes.com/companies/mcdonalds
- foxworth, (2013). Segmenting and Targeting Markets. Retrieved from bababababamcdonalds: http://bababababamcdonalds.blogspot.com/2013/05/chapter-8-segmenting-and-targeting_6.html
- Fraser, L. K., Edwards, K. L., Cade, J., & Clarke, G. P. (2010). The geography of fast food outlets: a review. International journal of environmental research and public health, 7(5), 2290-2308.
- Hebden, L. A., King, L., Grunseit, A., Kelly, B., & Chapman, K. (2011). Advertising of fast food to children on Australian television: the impact of industry self-regulation. Med J Aust, 195(1), 20-4.
- Helms, M. M., & Nixon, J. (2010). Exploring SWOT analysis–where are we now? A review of academic research from the last decade. Journal of strategy and management, 3(3), 215-251.
- Khoso, I., Ahmed, R.R. and Ahmed, J. (2014), “Pricing Strategies in Pharmaceutical Marketing”, The Pharma Innovation Journal, Vol. 3 (7): 13-17
- McColl-Kennedy, J. R., Yau, O. H., & Kiel, G. C. (2010). Marketing planning practices in Australia: A comparison across company types. Marketing Intelligence & Planning, 8(4), 21-29.
- Purdy, C. (2017). Charted: McDonald’s is hungry to prove fast food can compete with fresh food. [online] Quartz. Available at: https://qz.com/969275/mcdonalds-mcd-thinks-fast-food-can-still-compete-with-fresh-food-and-its-succeeding/ [Accessed 13 May 2019].
- Saifullah, A., Ahmad, N., Ahmed, R.R and Khalid, (2014), “Frozen Food Revolution: Investigating How Availability of Frozen Food affects Consumer Buying Behavior”, International Journal of Economics, Commerce and Management, Vol. 2 (8): 1-13
- Scott, R. (2012). 4 strategies for McDonald’s management.com.
- Sidra, M. A., &Attiya, J. (2013). Determinants of financial performance of a firm. Journal of Economics and International Finance, 43-52.
- Stephan, M. L., & Andreas, H. (2015). Measuring the profit impact of pricing & revenue management. Journal of Revenue and Pricing Management, 137-139.
- Vitasek, K. (2016). Trust and Collaboration: McDonald’s Supply Chain GLOBAL SOURCING COUNCILE.