McDonald’s recently launched its new MyMcDonald’s Rewards loyalty program on July 8th. This is a huge initiative for the fast-food giant, as it aligns with its efforts to further digitize its business. Back in 2015, McDonald’s launched in-store kiosks that allowed customers to order on a touch screen. In 2016, it launched its own dedicated mobile app where customers can put in orders for pick up. Then in 2017, it entered food delivery, first with Uber Eats then with other partners. The new loyalty program marks another significant moment in McDonald’s evolution to align with changing dining and consumer trends.
The Golden Arches initially tested the loyalty program in late 2020 in Arizona, Nevada, and several New England states before slowly expanding it to more regions. Now it’s rolling it out to over 13,000 stores nationwide. Interestingly, McDonald’s has similar rewards programs in other countries, like France, but this is its first attempt in the United States.
To participate in MyMcDonald’s Rewards, customers need to download the McDonald’s mobile app and then opt-in. Every dollar spent on the app is equivalent to 100 points. Customers can accumulate points with every purchase and redeem them for free food. There are currently 16 different rewards, split up into four different tiers. The “cheapest” items, like hash browns or a cheeseburger, cost 1,500 points. On the other end, the most “expensive” items cost 6,000 points are a Happy Meal or a Big Mac
To encourage customers to join MyMcDonald’s Rewards, they’ll earn 1,500 points after their first order as a member. To add even more hype to the launch, on July 13th, which is National French Fry Day, McDonald’s is giving away free medium french fries to anyone who registers.
With an iconic brand, millions of customers, and over a billion served, it’s surprising to see McDonald’s wait this long to roll out its rewards program. Loyalty initiatives are very popular across many industries (airline, credit cards, movie theaters, coffee shops etc) and could drive highly impactful results. In general, loyalty programs can help businesses:
- Create stronger customer engagement
- Drive repeat business
- Acquire new customers through existing ones
- Collect data on customers
As mentioned, McDonald’s has significantly invested to innovate its operations and these efforts are paying dividends. The company reported that its digital sales rose to almost $1.5 billion during the first quarter of 2021, driven by orders through digital kiosks, mobile app and delivery platforms. With the introduction of MyMcDonald’s Rewards, the company will layer on a gamification element and bonus incentives to enhance the dining experience. People love to be rewarded. The loyalty program can help establish a revolving door of repeat customers.
The second key reason for the loyalty program is data. Since reward points are only linked to in-app orders, McDonald’s could drive more app downloads and in-app activity. By collecting valuable first-party information, the company can create more personalized in-store experiences in addition to highly targeted marketing promotions. McDonald’s VP of Digital Customer Experience and Media Alycia Mason, said workers will greet loyalty members by name as they go through the drive-thru lane and customers will also get a personalized emails with upcoming promotions tailored to them.
For a while, McDonald’s probably didn’t need a formal loyalty program because it could’ve relied on its tremendous brand equity. It can be assumed that a vast majority of people can identify the iconic golden arches. The same amount probable have eaten at a McDonald’s at least once in their life. McDonald’s claims that 85% of Americans order from McDonald’s at least once a year. From a customer acquisition standpoint, McDonald’s shouldn’t have much difficulty getting new customers just based on its legacy (and maybe the smell of fries).
However, customer retention is focus here. Loyalty programs are designed to drive repeat business at an efficient way. For a customer to score any of the rewards they would have to 1) dine at McDonald’s multiple times or 2) spend money or 3) both. For example, just to claim the lowest tier of food rewards( i.e. hash browns, cheeseburger), a person would have to spend $15 (to get 1.500 points). That’s $15 for an item that probably cost $1 at most to produce. A Big Mac is worth $60 (or 6,000 points). That’s a tradeoff McDonald’s is happy to make. Points are a great way to masks this huge discrepancy and make customers forget how much money they’re spending. If McDonald’s positioned it as “spend $15 and get a free hashbrow”, program enrollment will surely be meager.
With the data collected from the loyalty program, McDonald’s can execute targeted promotions based on a customers behavior. Cross-selling menu items will be a big opportunity to increase a person’s potential spend. If a MyMcDonald’s Rewards member orders chicken McNuggets frequently, the company can offer discounts on its chicken sandwiches in hope that it adds another item to that person’s purchase behavior. Additionally, if McDonald’s notices that someone hasn’t ordered in a few weeks, it can directly send them a coupon to change that.
Overall, the MyMcDonald’s Rewards loyalty program is a great move for the company. It should help increase customer base and sales in a highly saturated fast-food and fast casual restaurant industry. Chipotle and Taco Bell have seen good success with their respective programs.