Dive Overview:
- McDonald's will deploy a digital marketing fund on Jan. 1, 2025 to accelerate its digital investments and expand its competitive advantage, the company said in a memo viewed by Restaurant Dive.
- The chain will transfer its digital marketing tools – its MyMcDonald's app, customer relationship management platform and consumer-facing web tools – to the new fund in Australia, Canada, Germany, the UK and the US.
- The fund will represent 1.2% of the company's defined digital sales. When a customer “verifies their identity at the time of transaction and allows us to market to them directly.”
Dive Insights:
The funding shift is expected to provide a cash flow benefit of about $2,600 for all U.S. McDonald's restaurants starting in 2025 after the expenses are moved from the income statement to a digital marketing fund. The fund will cover ongoing costs as McDonald's expands its digital business, according to the memo. The global mobile app is currently paid for with an annual fee, according to the company's 2024 franchise disclosure document. The company recommended the fund be paid out. This will be made within McDonald's Cooperative Marketing Fund's existing OPNAD and Community Marketing Donations.
“While this does not change the system marketing contribution percentage required for 2025, it does require different thinking about how to deliver the most effective approach for the system,” the company said. “This change is consistent with the feedback we've heard from owner-operators. [the Global Mobile App] CRM is a marketing tool and should be funded as such.”
The company said the marketing strategy will enable it to better understand customer behavior and optimize “customer lifetime value” while maintaining systems for data management, network security and data storage.
“Shifting marketing investments from traditional mass media like TV, print and billboards to holistic investments in modern, digital capabilities to personalize the experience will improve profitability,” McDonald's CEO Chris Kempczinski said during the company's first-quarter earnings call. “And successfully delivering that personalized experience depends on transforming our restaurants to give customers what they want: fresh, hot food delivered with convenience and precision.”
The change comes as McDonald's continues to rapidly grow its digital channels and loyalty program, which generated nearly $25 billion in systemwide sales from loyalty members across 50 markets in the past 12 months and is on track to reach $6 billion in the first quarter of 2024, according to the company's earnings release.
The company said in the memo that it will also invest hundreds of millions of dollars in innovation and other digital products, including new ordering channels like web ordering, personalization and expanding ways to use points. McDonald's also plans to transition from local value messaging to a national value platform.
“With foot traffic tight for QSRs, we have an opportunity to get customers who are already in our stores to come back more frequently. As more customers make purchasing decisions based on personalized recommendations on their phones, to drive more frequent visits we need to leverage digital capabilities like loyalty to know when to serve customers better than anyone else,” Kempczinski said. “Using the insights we gain from our loyalty members, we'll strive to reach the right consumers at the right time with the right message.”
There will be no changes to other international operating markets or international development license markets in 2025. These markets will adopt the new model once they have the tools and capabilities, the company said in the memo.
