Arch Deluxe Failure

Arch Deluxe Failure

Introduction

Market research is a crucial element in the launch of a product, in trying to improve an existing product or service or when one is looking to be one step ahead of their rivals in the market or industry of business operation. It offers a business with the necessary information to make informed business decisions (Bern, 2004). It offers a business with the opportunity to understand their customers that is who will buy the products and how often they will buy? What exactly the do the customers expect and want? Such information offers more understanding on the same and results directly meeting the needs of the customers better than the competitors. Moreover, it helps in establishing the market size and what prompts them to buy. Market research is also important in understanding the business competitors. That way, the business will be well placed to carry out business operations effectively as they have all the key information about the market. Simply put, market research offers critical information that helps businesses to identify and analyse the customers, market needs and competitors (Brown, 2014). This essay presents a case of brand failure due to failure to conduct market research. The case that will be discussed is McDonald’s Arch Deluxe that was launched in 1996. When McDonald’s launched the product, they thought that this was what the adults wanted to eat. However, people did not agree with the company and thus the product failed. The essay focuses on the market research construct as the major reason behind its failure. First, the essay presents a brief introduction where it touches lightly on the importance of market research in product launch, then presents a brief background of Arch Deluxe. There is a section for the failure case in detail, another section for literature review which gives the reasons of the failure. The last sections are discussion and managerial implications (both short-term and long-term).

Background

When it comes to attaining marketplace success, understanding competition is very important. More important than that is getting to know the target clientele. However, McDonald’s seems not to have followed this in 1996 when it released the Arch Deluxe, a product in the burger category (Dougherty, 2013). This was one of the greatest market failures even though it was referred as the greatest brand launch. The product was launched with the aim of drawing and activating more customers. Thus, the company featured all that it thought was adult and fancy. A bigger patty, a large piece of lettuce rather than the shredded ones, a fluffier split-top bun with less sesame seeds, and a debauched Dijon-mayonnaise spread (Dougherty, 2013). Notwithstanding the $200 million allotment on advertising campaign, the product only lived upto what was expected in relation to profitability and taste. Within just 4 years of its initial development, scanty sales and a lack of eagerness and interest resulted in the discontinuation of the burger by the company for good (Dougherty, 2013).

During the mid-1990s, the famous fast food corporation found itself in an industry that was becoming more and more competitive due to a constant rise of other fast food chains such as Wendy’s and Burger King. This resulted into a decline in sales at McDonald’s restaurants and at this point the organization realized it was time add some flair to its servings. As a result, the Arch Deluxe burger was created, a product that concurrently promised to develop the company’s customer base through its menu offerings. The chain set aside $200 million in 1996 solely for the launch and promotion of the new brand that took two years to develop (Kreiss, 2020). The burger was officially launched on 9^th May, 1996 during an event at the Radio City Music Hall. The product was later referred to as the largest product launch in McDonald’s history and ultimately one of the largest blunders.

McDonald’s was constantly losing clients to its rivals by 1996. The sales started to go down in more than 12,000 of the chain’s restaurants across the United States, whereas for Wendy’s and Burger King, the sales had risen up by 7.5% and 2.5% respectively. Moreover, McDonald’s was also experiencing problems with its image (Kreiss, 2020). A research by McDonald’s showed that 78% of its clients felts that the company had the best for children while only 18% felts that it offered the best for adults. McDonald’s decided it probably had been missing out on a whole customer market that is adults. Traditionally, the company’s gimmicks and advertising campaigns had been evidently focused on kids with playgrounds, Happy Meals, and toys being a highly expected and anticipated part of the customer experience. McDonald’s finally launched the Arch Deluxe and felt that it now had a product particularly created for a more adult consumer base (Kreiss, 2020). It hoped that the new product would change their reputation as a children-centric eatery and thus even abed the Arch Deluxe as the burger that had a ‘grown-up taste’.

Until the launch of the Arch Deluxe, most of the menu items at McDonald’s were made with kids’ taste buds in mind and thus, the chain started to worry that the lack of mature and flavourful meal offerings could actually be resulting to declining sales (Haig, 2005).  The Arch Deluxe was the response of McDonald’s to the imagined lacuna in their customer market. The burger was a representation of everything that the chain thought an adult customer needed in a burger. Featuring a considerably bigger beef patty enhanced with a big leaf of lettuce, only a single slice of cheese instead of two, a tomato slice, and a fluffy bun, Arch Deluxe’s secret was seemingly in the sauce. Different to the other burgers made by the chain, Arch Deluxe had a Dijonnaise sauce with mustard seeds which the company promised would bring burger lovers straight to the chain’s restaurants (Haig, 2005). When it was launched, it cost $2.59 and $2.79 for those that desired an extra round piece of bacon.

The burger operated with an extravagant $200 million promotion campaign, a reason for launching the product at the Radio City Music Hall (a luxurious event). Besides the launch of the burger, the event also featured a classier and stylish Ronald McDonald dressed in a suit rather than his usual traditional wear. According to Verma (2008), McDonald’s obsession with its stylish new appearance was not limited to the original launch of the burger at the Radio City Music Hall. The company launched a whole series of new advertisements that shed away its younger customers and received adult ones. Specifically, there was an advertisement that focused particularly on showing who the target market for the burger really was. Other adverts featured a mature and grown up Ronald McDonald doing things that would be perceived as mature or adult things while enjoying the burger. He was featured in business suits and playing billiards and golf, things that adults do.

Regardless of its specifically expensive promotion campaigns, Arch Deluxe’s appeal did not seem to get to its targeted consumers. Sales were informally expected to reach $1 billion in the first year, although the real figures must have been poor. McDonald’s kept the information under constricted wraps when the weak indication for the burger became evident (Kincheloe, 2002). When the fear concerning sales of Arch Deluxe started spreading among the owners of the franchise, Edward Rensi, the CEO and president if the McDonald’s operations in the United States released a strict memo stating that the burger was never meant to be a silver bullet and that it purportedly beat the internal projections of sales by at least 10 per cent.

The chain attempted another way to improve the new burger’s sales and interests after making various trials to entice the now-seemingly unachievable adult consumer market. Soon after realizing that the burger was not picking up pace in the market, the chain released ‘Campaign 55@. Albeit the reluctance from various owners of the franchise across the United States, the chain pushed through a campaign deal and sold the burger for just 55 cents in an attempt to bring in more customers. What the chain did not put open was that the campaign worked only if a consumer also bought a frequently priced fries and drink along with it. This lead to a significant reduction in the profits for stores and also left consumers feeling enticed and switched. Consequently, McDonald’s continued to clear Arch Deluxe until it was lastly removed from the menu. This took place in 2000.

In the middle of the crisis that was surrounding the launch and the consequent failure of the Arch Deluxe, Edward Rensi announced his formerly unforeseen retirement. This quickly followed reports that the general company’s sales were constantly declining and the preceding year’s launch of Arch Deluxe had not thrived as expected. Edward Rensi explained that his reason for retirement was entirely personal although most people suspected that this was not the circumstance. Following his retirement, the chain continued to change corporate goals through restructuring various leadership positions and dividing the stores into 5 geographically based areas in an attempt to manage the needs of different franchises better.

Literature Review

Academically defined, market research refers to the process of evaluating the viability of a new service or product by conducting a research directly with the potential customers. This method allows business to identify their target market, gather and record views and opinions and thus make good decisions (Wiid & Diggines, 2009). The research can be carried out by an organization or can be outsourced to entities with professionalism and experience in the procedure. It is a thorough process and can be conducted by surveys, interviews, sampling among other processes (Heding, Knudtzen & Bjerre, 2008). The main goal of undertaking market research is to assess and understand the market linked to a certain service or product in order to determine how the target market will react to it. The data from the research may be used to tailor advertising or marketing strategies and to establish the requirements, needs and priorities of consumers (Hamersveld & Bont, 2007).

Even though McDonald’s did its research before launching Arch Deluxe, it appears not to have carried it as thorough as was necessary. The chain defined the problem as it knew that it predicted an image that was centred on kids and was attempting to market their goods towards the adults. McDonald’s should have developed a good research plan by figuring out the most optimal way of collecting information. Through this, they would know whether to conduct surveys or run small commercials to see how people would respond to them and ask them when they came to the chain stores (Ao, 2018). This would have enabled the company to gather relevant information on what category of people would love the new burger and how much they would be willing to spend. Through this information, McDonald’s would be able to make informed decisions such as setting a convenient price, which would be good for the people and the company itself.

McDonald’s did not create a systematic research plan and this appears to be what made the burger fail terribly. The chain just introduced what they thought people would like and put commercials right away. In addition, the way the commercials were conducted did not help the course. They were trying to create a burger for adults with kids trying it out. Despite introducing a new burger with a new flavour, the burger was made costly than all the other menu items and people did not want to buy it (Ao, 2018). Therefore, it all goes down to research. The company should have conducted a thorough market research to create something that the customers would want.

The main purpose of Arch Deluxe was to market the company’s fine cuisine or cookery to the urban adult market. Unluckily, adults were not interested in spending more for a new burger. McDonald’s is a fast food chain and it limits its main target market to those who take convenience and cheap over fine taste. People who want to consume good food and are not bothered by the price would rather eat in a formal dining hotel or restaurant (Palmatier & Sridhar, 2017). The market campaign by the chain contradicted its original brand of family friendly and child friendly by bringing in a new burger that excluded kids and emphasized luxury customer markets. This resulted in a loss of trust and broke the connection with former clients.

A brand’s image should be straightforward and clear such as when consumers think about it, they will know what it is popular for. Creating items that contradict a brand’s identity may result in confusion among consumers. Even though a costly burger with needlessly good and more beef plus other ingredients appeared impractical back in the 90s, it is a common tendency which has worked well in various fast food stores today. Burgers are no longer a product for kids, but for adults too and it is bought at quite a high price. According to Palmatier & Sridhar (2017), McDonald’s in fact began to use Arch Sauce in 2018 with a more reasonable price. Thus, even though inventions and innovations are crucial, consistent market research is exceedingly critical because some ideas that may do well in the future is not necessarily suitable for the present market trend as planned.

The Failure Case

McDonald’s Arch Deluxe was an attempt to attract more adult consumers to the fast food chain. The burger was considered to have more refined ingredients and be made specifically for adults. It was made with a special sauce, potato sesame seed and two patties and these improved ingredients made the burger a bit expensive. The company spent more than $150 million in commercials to reach the desired audience (Palmatier & Sridhar, 2017). Unluckily, the success did not happen as expected. One major reason that resulted to the failure is that the burger places are known to target a particular group of individuals that is families with children and people who want to eat on a budget, and this was not the case with Arch Deluxe. The burger was made for a different group of people and this brought confusion among customers. Consumers were not willing to purchase a quite higher-priced burger from the chain, rather those that wanted a more high quality one would just go to another restaurant, in this case the Burger King and Wendy’s. There was the issue of branding conflict. Since its establishment, McDonald’s has always targeted the market of families with children who look for affordable meals. The Arch Deluxe came with the message that only the adults were supposed to eat it (Ferrel, Hartline & Treviño, 2011). In addition, the time that this burger was introduced may have contributed largely to its failure. The Arch Deluxe was launched in the 1990s and during this period, people were not spending a lot of money on burgers.

The fast failure of Arch Deluxe did not happen in a vacuum. Actually, it appears that there were issues that the chain ignored, from the needs of its customers to its quality standards when McDonald’s was preparing for the release of Arch Deluxe. The company did not appear to comprehend fully on the taste buds and desires of its new target consumers (Ferrel, Hartline & Treviño, 2011). Besides the truth that Arch Deluxe was rapidly criticized for being specifically bland and bulky, the adult consumers did not have extravagance fast food on their minds. In the years that led to the product’s release according to reports, people aged between 45 and 54 had been considerably their takeout and dining budgets, which meant that achieving the available income in this market was already progressively competitive (Thakor, 2000). Furthermore, by attempting to tap into the mature market without linking into the kids market that was the company’s domain, the company risked excluding the devotion of their existing consumers. For instance, advertisements that featured children being cleared out by the Arch Deluxe while the adults liked it were purely showing that the burger was for adults. Thus, it risked inspiring kids who were their major consumers to associate the chain’s burgers with gross meals.

The company’s essential plea had been that it was a creation for children and families to eat together and the new burger did not market this to customers well. There was a second disapproval that related to the quality of the chain’s food in general. McDonald’s had not yet implemented the conveyer belt-style assembly scheme in the mid-1990s (Salvatore, 2007). This system preps food fresh for each other, but McDonald’s was still prepping part of the foods and setting aside the ingredients until their order and assembling. This made the food to taste less than fresh and this did not help the profit margins of the company against competitors.

Managerial Implications

To make a positive shift, McDonald’s should have adopted the following philosophies. A professional team should have been tasked to carry out a research on the market aspects in order to restrain probable flopping of the burger. Consequently, the company ought to have engaged in an extensive market research. This would enable it to establish if the adult consumers would support the adult burger idea in the first place. In the market analysis, the realization that adults regarded the burger as unhealthy would have been apparent. A launch of a rather low calories burger that could bring about little resistance should have been considered. Moreover, the promotion campaigns should not have used kids as the target market was adults. Roger’s model states that an innovation should be introduced to persons who simply use an innovation to provide optimistic reactions. In this case, adults enjoying the burger would have been a suitable model for the commercials as it would ensure positive reactions to initial adopters of Arch Deluxe. Haig (2011) argues that the company management ought to know that individuals do not always embrace change. Furthermore, there must be proper channels to bring about change in organizations. It is not easy for people to accept inventions, so the company should have learned how to introduce Arch Deluxe in the market. As such, people should have been prepared early enough for the release of the new food and thus their complaints would be minimal regarding the changes made to the burger. Product prices should always be fair for them to register higher sales in any industry since people always resist increased prices. The chain should have established a fair price for Arch Deluxe to sell as expected. This would have been achieved by ensuring lower costs of production of the new burger. The result would be people being enthusiastic to try something new at a reasonable price and no one would complain. It is also important for companies to consult with people who command the food sector when founding and implementing new innovations. A person whose views and opinions on food are highly regarded is more suitable to be in the burger commercials rather than kids complaining. In addition, bringing nutritionists on board to offer guidance on healthy eating habits, and propose the burger to people who want to eat healthy foods results to higher sales and revenues. The company would sell greatly as people would be convinced that Arch Deluxe was healthy.

References

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