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Interview with McD's CMO Mary Dillon



May 4, 2008

McDonald's is a juggernaut. The No. 1 U.S. fast food chain grew 6.1% to $28.75 billion last year, per Technomic, Chicago. For a little perspective about how big McDonald's is: Its sales are three times that of No. 2 burger chain Burger King.

Not too bad, considering in 2003 some analysts were saying that the Golden Arches were becoming tarnished. Saddled with image problems (it was considered cheap and out of touch) and strong competition from all sides (fast casual took off), many said the chain's outlook was dire.

It wasn't. McDonald's rebounded quickly with a flurry of premium products (salads and all-white chicken nuggets) and a brand new jingle ("I'm Lovin' It").

Now five years later, global CMO Mary Dillon has been put to the task of keeping the chain's sales singing. But, McDonald's is facing a new challenge, namely a struggling economy. In March, its same-store sales grew only 0.9%, it's smallest gain in about three years.

Dillon is ready, armed with a flurry of integrated efforts centered around the Olympics, the Kung Fu Panda film and fresh "I'm Lovin' it" ads.

Dillon, now in her third year as McDonald's top marketer, stopped by Brandweek's offices to chat with news editor Kenneth Hein. She revealed many of the chain's plans for the remainder of 2008, calling it "The Year of Innovation." McDonald's will look to innovate its activations leading up to the Olympics in Beijing, despite the many protests about the Games. This includes new global ads, an online game called The Lost Ring (which has generated two million players to date) and a chance for some lucky kids to see the Olympics live.

McD's also will continue to not only try to get kids more active via its Happy Meal promotions, but also make them mini-activists. As part of its Kung Fu Panda promotion, it will partner with Conservation International. Here are the rest of the details regarding Dillon's strategy:

Brandweek: What can we expect from McDonald's for the rest of the year?
Mary Dillon: It is a year of innovation at McDonald's. We are the kind of business and brand that is never happy with yesterday. We are always looking to tomorrow and how do we get better? The Beijing Olympics in 2008 will be a great opportunity for us to demonstrate to the world our commitment to the Olympics as well as to bring our innovation and marketing ideas along for the ride. We have a long-standing commitment to children's well being. One the new things we are bringing to the marketplace is a program called "Olympic Champion Kids." It's a one-of-a-kind program that McDonald's and the Olympic committee have worked on together to bring children from all around the world to Beijing to experience the games. Three hundred children will come from close to 100 countries. They will get the chance to experience everything. It will be a once-in-a-lifetime chance to meet athletes, attend events and do some cultural touring. It's something we think will shine a favorable light on McDonald's and be exciting to the kids involved.

The other thing we have going with the Olympics, that I'm really excited about, is the opportunity to show off our food quality. We've been a sponsor of the Olympics for 40 years. A lot of people don't know we've been feeding the athletes as well, since 1996. We are the official restaurant of the Olympic games. We are the only branded restaurant that the athletes have access to and it's very popular. We're really, for the first time in a while, going to bring some attention to the fact we feed the athletes, through our advertising. We just debuted the ads at our annual convention [in mid-April]. [It juxtaposes "The More We Get Together" children's song against intense athletic competition. After, the athletes are smiling as they eat McDonald's.] It says "Official Restaurant of the Olympics" at the end. We did some research and found out that customers are excited and surprised that we feed the athletes.

The third leg to the Olympic activation stool is the "Olympic Champion Crew." We like to honor the best of the best of our crew around the world and also have them, about 200 crew members, come to Beijing to serve the athletes and spectators along with another 1,200 crew members from China. It's a unique honor to be the best serving the best. They get to meet employees from all over the world. It's a huge life-changing experience for many of them.

BW: What about the protests?
MD: It's an interesting time, that's for sure. There are always some times that controversies can be stirred up. We are really just focused on the Olympics themselves and supporting the games and the athletes. and bringing our assets to life the best we can.

BW: Does innovation apply to the menu?
MD: Food innovation is a core strategy for all around the world whether it is in breakfast, chicken products . . . We're just launching what we're calling a Southern-style chicken sandwich. It's a sandwich and a breakfast sandwich. It's in a local rollout right now. It's a product we developed that's originally from the South, but we tested it all across the U.S. to see if it had resonance and relevance.

BW: Are you still "Lovin' it?"
MD: The year of innovation is not only about innovating but also about building on strategies that are working. Building the brand to build the business is about three things: It is about differentiating the McDonald's brand. It's about continuing to strengthen perceptions about the McDonald's brand in various areas like food quality and commitment to children and young adults. And then it's about increasing the impact of what we spend in the marketplace.

One of the easiest ways of showing yourself to the world is through television advertising. It tells the most clear story and is visible. "I'm Lovin' It" is a campaign that has a lot of life ahead of it. There are many campaigns that have gone five, 10, 15 years; the trick is to keep strengthening it and making it better. The words and the five notes, global awareness of both are about as high as it gets and the likability of it is also quite high.

Creating that emotional bond is one area we do pretty well, but we can do better. One ad, "Victory," was recently developed for the U.S. and for global use. [It shows a children's soccer tournament where the winning team hams up the fact they won the trophy. The losing teams are frowning until they are handed some McDonald's food. Then they hold it up as if they won]. It's just an example of how you can advertise Happy Meals in a way that has more of an insight. Everyone can relate to winning and losing, but this also shows that something like a Happy Meal at McDonald's can make everything better. That's what's fun about it.

Another ad, "Driving Test," shot in Australia, again takes a human insight which is, that anywhere in the world kids go through rites of passage, and how you can connect that insight to your brand. [It shows a young man passing the test and showing his inexperience when he takes his first trip to a drive-thru and parks too far from the window]. It's something you can relate to, learning how to drive and showing how McDonald's fits into that experience.

BW: Any movie tie-ins coming up?
MD: Happy Meals are a core equity to our business. Our commitment to children is something that goes way back to the foundation of the company. Our opportunity now is, "How do you do fun things kids love in today's responsible marketing environment and bring it together in a way that will continue to build the business." We've ramped it up to a new era starting with the Shrek promotion last year. We have a couple of events a year we use to put our marker down. Shrek focused on "green" and for the first time focused on putting the characters on our packaging, like the apple dippers in the U.S. We also created a Web site where you could extend the fun of the property. It encouraged them to get offline and get active. That wasn't a one-off. This is the way we think about Happy Meal programs.

Kung Fu Panda is a DreamWorks animated film. It will break in June in the U.S. and this commercial ties it to a scene in the movie. [Two child martial arts experts fight over the last nugget Crouching Dragon-style]. It's a great movie; toys that really leverage the property and the characters again will appear on the packaging. It's still breaking new ground for us and, as kids go onto the Web site, they have a combination of body, mind and spirit activities, which is what martial arts are about. There is definitely a learn martial arts-type theme. There is also mind-stimulating type games. For the spirit part we are partnering with Conservation International, adding a wildlife component, learning about pandas, saving pandas and learning interesting facts. It adds up to fun with a purpose.

BW: What are you doing with digital?
MD: We created The Lost Ring. Obviously the way young adults consume media is different from anybody else. One of the ways they love to spend their time is online and there is a subgroup of adults who really like to spend time gaming. We created the first ever global alternate reality game. It launched about six weeks ago and will continue into the Olympics. It encourages people to join forces online and offline to solve this mystery.

We're learning as we go from this market. It's really about engaging the young adult community and building a relationship with them. Since it launched, we have two million that have been engaged in the game around the world. It's being played in seven languages across 100 countries. It has spread very virally. It's not something, unless you're in that world, that's easy to relate to. There were times when I was trying to get this off of the ground and make it happen that it was challenging to get people to understand what we've done here.

Every piece of the media mix we touch we try and use in a cutting edge or innovative sort of way. Whether it's radio, in-store merchandising or even billboards. We're experimenting with different things: electronic reminders in certain parts of Asia, electronic coupons—there is a lot of experimentation going on around the world.

BW: Is McDonald's recession-resistant?
MD: In the U.S., economic times are tough for everyone, that's no new news. But, we're feeling good about the way our business is performing. It's right to say our business is recession-resistant, but we're not recession proof; nobody is. Based on the quality we offer, the value we offer, the convenience in terms of location and hours and service, we're well-suited to weather any economic storm.


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