Individual Assignment

Pricing Strategy for McDonald’s

By

Kapil Wadhwa (Roll No- EPGP013)

Professor: Prof. Vinay Singh Chawan

Pricing and Revenue Management

Table of Contents

1.1 About McDonald’s........................................................................................................................3

1.2 McDonald’s positioning in India..................................................................................................3

1.3 McDonalds Pricing Strategy.......................................................................................................4

1.4 McDonalds Vs Competition.........................................................................................................5

1.6 Conclusion.....................................................................................................................................7

1.1 About McDonald’s McDonald’s roots go back to the early 1940s when two brothers opened a burger restaurant

that relied on standardized preparation to maintain quality—the Speedy Service System. So

impressed was Ray Kroc with the brothers’ approach that he became their national franchise

agent, relying on the company’s proven operating system to maintain quality and

consistency.

McDonald entry in India dates back to 1993 where in it incorporated its wholly owned

Subsidiary – MacDonald’s India Private Ltd. In October 1996, it first opened its first Fast food

Center in Vasant Vihar, New Delhi. Later it entered into 50:50 Joint Ventures with Connaught

Plaza Restaurants owners who were Vikram Bakshi of North & Hardcastle Restaurants and

Amit Jatia of West. Before the launch the Indian Management team was trained extensively

in McDonald’s Indonesia and US.

1.2 McDonald’s positioning in India

1.2.1 Product Adaption for India

McDonald’s has the policy of adopting the product adaption to local taste of the country.

While it moved to other countries of South East Asia it introduced products like Burgers with

Thai Basil in Thailand, Teriyaki Burgers in Japan and Rice Dishes in Indonesia. For India as

well company adopted the similar strategy where in it came out with various products

customised to the local flavours. Moreover adaptation was required at higher level as

different regions in India have different taste for food. Moreover McDonald’s had to introduce

a complete vegetarian section as 40% of the population was vegetarian. Working on these

lines, McDonald made amendments to it current product line to suit Indian conditions like

Maharaja Mac replaced Big Mac (used in US) and Chicken Patty was used instead of Beef.

1.2.2 McDonald as Family Restaurant

McDonald’s success in India can be owed to its positioning as family Restaurant. In order to

position itself effectively McDonald has stringent cleaning standards and keeps its trays

sanitised several times a hour. Further meticulous attention to cleaning is paid beyond lobby,

kitchen to the pavement & area outside.

To give it a home like look, McDonalds came out with high chair concepts and the whole

ambience is designed to give bright, casual, comfortable and contemporary look. Special

attention is given to children and there various gift vouchers and meals designed for the kids.

1.3 McDonalds Pricing Strategy

1.3.1 Value Pricing

McDonald’s came with the concept of value pricing for Indian consumers where in it came

out with various combos in form of

Happy Meals comprising of small burgers, fries, coke + toy.

Medium meal combo that consisted of burger, fries and Coke with the price of Rs 75

Maharaja Mac Meal – Rs 94

Family Dines under Rs 300

The prices for the meals were economical as compared to the offerings in Pakistan and

Srilanka and are 50% less than United States.

1.3.2 Product line Pricing

McDonalds has a unique price strategy which falls solely on many of their product lines.

Their Value Meals fall into the category of Product Line Pricing.  “Where there is a range of

product or services the pricing reflect the benefits of parts of the range.” For example, you

can order a Two Cheeseburger Value meal that comes with a medium drink and fries for

around Rs 75 (prices may vary).  You can Super Size this meal to get a large drink and large

fries for a little more money or you can go with another value meal that might include

different items for different price.

1.3.3 Promotional Pricing

If you have driven past a McDonald’s, you will notice that somewhere on their property,

whether it is a banner on their building or spelled out on their sign, they are always offering

some sort of promotional pricing. This promotion can be seen as a large banner draped

across the building on many restaurants. This promotion changes weekly and may consist of

different menu items packaged together.

1.3.4 Penetration Pricing

When McDonald’s first began to break into the coffee market, they ran a large marketing

campaign in order to gain some market share in the industry. For a limited time frame, you

could get a free small coffee every morning from 4-7am.  This was to promote their new

coffee partnership with Green Mountain Coffee and helped spread the word that McDonald’s

was now offering coffee.   

1.4 McDonalds Pricing Vs Competition

1.5 Conclusion Success of McDonald’s has been mainly due to its value for money offering to the Indian

Consumers. The prices offered are in the range of lower middle section of the society.

Moreover its customisation in accordance with the taste of Indian consumers has also

worked in its favour. The target segment of McDonalds has been Young Family who eats

out. Moreover it also places special focus on Children where in it believes that family follows

the children choice of eating joints. It has created a differentiation factor in India through

highlighting brand, food and variety. This has been a shift from worldwide positioning of

drive-in convenience and speedy service.

McDonaldsValue Meals starting from Rs 39Burgers starts from Rs 18Combos Starts from Rs 70Ice Creams starts from Rs 12

Nirula'sBurgers starts from Rs 23Snacks item start from Rs 28Regular Pizzas start from Rs 68

Domino's Regular Veg Pizzas starting from Rs 65 Regular Non Veg Pizza starting from Rs 95Combo of 4 small Pizza starting from Rs 200

KFC Burger + Soft Drink Rs 59-79Chicken Rice + Gravy meal starting from Rs 39