Last week, McDonald's released some interesting news regarding their Big Mac sales. In celebration of the nationwide rollout of McDelivery with DoorDash (a partnership between McDonald's and DoorDash), the popular fast-food chain decided to sell one million Big Mac sandwiches for only one cent each, and in addition to this, consumers participating in this event were eligible to win $1 million dollars.
As if the partnership between McDelivery and DoorDash wasn't enough, McDonald's made this decision to promote the rollout. What is the effect of this kind of marketing on a big fast-food chain such as McDonald's? A closer look marks some important characteristics of marketing. For example, we can see the law of demand at work here. The law of demand states that all else equal, as price falls, the quantity demanded rises. Selling Big Macs for just one cent each is bound to attract consumers and therefore increase demand. However, as we know so far, this is only a one time offer, as it is a promotion. The effectiveness of the one-cent Big Mac may decrease if it were not a one time offer, due to diminishing marginal utility. A one-cent Big Mac might entice consumers to buy this product for a short amount of time, but with each consumption the marginal utility decreases, and therefore this would not be effective in the long run. As for the one million dollars, this plays more into incentives and how advertisement works in the market. Potentially winning $1 million dollars may persuade people to buy the one-cent Big Mac in the first place. Would having more of these kinds of offers in the future increase McDonald's overall profit and success in the market? It seems that so far, their marketing techniques have been successful.
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The 1¢ Big Mac is actually not 1¢ when you add on the charges from DoorDash for service, delivery, and taxes (+tip). Since DoorDash makes those prices based on your order, they are able to raise service and delivery fees if you use that code for the 1¢ Big Mac. McDonalds and DoorDash do gain profit as they do demand since the cost of a regular Big Mac is a mere $3.99. People value 1 million dollars more than the 7$ it costs to get the 1¢ Big Mac delivered by DoorDash to your home. It is worth it to many to take that chance since 7$ is very insignificant compared to 1 million. I do believe that these kinds of offers will increase McDonald's overall profit and success. The new delivery services like DoorDash, Postmates, and Uber Eats provides a convenient way for people to get their food delivered for them. Restaurants are more likely to use these apps instead of hiring workers to go out and deliver it for them. Instead they can use people who are willing to work for these companies to deliver food.
ReplyDeleteI really like how you applied a lot of what we learned into relating to this specific advertising. As a customer, I definitely am inclined to buying more products when it is cheaper, shown with the spending activity we did in class. For example, when Pressed Juicery has its deals of a $2 freeze for a limited time, I go back as many days as I can in that period of time. Normally, the product would be $6-8, but the fact that it is only $2 increases my demand for the product. Because it is limited time only, I don't feel such a drastic difference in my marginal returns, but if the time period is long enough, and I go enough times, I do feel myself not enjoying it as much. It is really interesting to see how companies can promote their product with certain deals that they know will customers will react to.
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