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McDonald’s Corporation (MCD): Image Change Isn’t Easy, but Is It Profitable?

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News broke recently that McDonald’s Corporation (NYSE:MCD) is trying to change their image.  What image do they have?  Well, it seems that McDonald’s Corporation (NYSE:MCD) has the reputation of having unprofessional, and at times rude employees.  That’s not good news for a company already struggling with same-store sales.  So in a valiant effort to provide their customers with a better dining experience (and to make more money of course) they are reinforcing their value of “service with a smile.”

Not So Fast

The thing is, changing your image is easier said than done.  Many companies have set out to change the way they are viewed with varying degrees of success.  It takes an extreme amount of time and effort to successfully pull such a feat off.  With all the energy expended in such efforts, we must ask: Is it even profitable?

McDonald's Corporation

For me, there are two criteria that determine whether an image change is a profitable endeavor:

1). Customers have to come to believe in the new image.

2). The image has to be something that customers actually want.

When I think of that first point, I think of the success of Tim Hortons Inc. (USA) (NYSE:THI).  Tim Horton’s for years has been identified as the go-to destination for a morning cup of coffee in Canada. For many customers Tim Horton’s was coffee.  To counteract this, management said last year:

Last year we introduced innovations to our guests that continue to change how we are defined in the quick service restaurant sector, and expanding the ‘boundaries’ of both how our guests perceive us and how we perceive ourselves.

What are some of those “innovations”?  They have experimented with trying to get people to come in to the store and eat.  They are now offering a full menu with things like paninis, soups, and even lasagna.  They also rolled out an extensive WiFi service that will make them the largest free WiFi network in Canada when completed.  This is all in an effort to change their image from “just coffee” to a desirable restaurant outing experience.

Is it working?  According to CEO Paul House, yes.

“Menu innovation and other strategic initiatives helped contribute to our growth in the fourth quarter, as shown by improvements in same-store sales growth rates compared to the previous quarter…”

It seems that customers are buying into Tim Hortons Inc. (USA) (NYSE:THI)’s new image. But where some companies succeed, others fail.  One need look no further than the disastrous image change attempt by J.C. Penney Company, Inc. (NYSE:JCP).

J.C. Penney Company, Inc. (NYSE:JCP) for years has been known for their outlets, their sales, their promotions etc.  CEO Ron Johnson said all these things had to go.  He felt that J.C. Penney needed to go from a discount home store to a high-end competitor for Macy’s, Inc. (NYSE:M).  But is this what customers wanted? Not at all.

In the second quarter of last year, things were already looking grim.  It was just 6 months into the re-branding, but it was clear customers were rejecting the new look.  Arrogantly, the quarterly report stated “…we are confident that the transformation of J.C. Penney is on track.” This confidence was despite all evidence to the contrary.  It was completely obvious even then that this was not a image change that customers ever wanted.

Due largely to this unsuccessful re-branding, Johnson has been let go, and the future of the company is shaky at best.  Soon to be non-existent at worst.

Back to Mickey D’s

So, let’s look back at our criteria and ask a couple of questions.  Do McDonald’s Corporation (NYSE:MCD) customers want friendly and professional staff?  Of course!  Management’s recognition of the need to change was spurred on by customer complaints.  There is absolutely no questioning that customers want a new image for McDonald’s Corporation (NYSE:MCD).

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