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April 16th, 2015 by Alfred Taubman     Category: Business     No Responses

McDonald’s New Third-Pounder May Not Add Up

The announcement last week that McDonald’s will be adding a new third-pound burger to its menu brought back some unpleasant memories for me. I don’t have anything against McDonald’s and I wish the company’s new CEO Steve Easterbrook the best of luck in revitalizing the brand. But from my experience as owner of A&W Restaurants from 1982 to 1994, I’m concerned that the American consumer may not fully understand or value the third-pound promise.

As I point out in the chapter on A&W in my memoir Threshold Resistance:

We were aggressively marketing a one-third-pound hamburger for the same price as a McDonald’s Quarter Pounder. But despite our best efforts . . . they just weren’t selling. Perplexed, we called in the renowned market research firm Yankelovich, Skelly and White to conduct focus groups and competitive taste tests.

Well, it turned out that customers preferred the taste of our fresh beef over traditional fast-food hockey pucks. Hands down, we had a better product. But there was a serious problem. More than half the participants in the Yankelovich focus groups questioned the price of our burger. “Why,” they asked, “should we pay the same amount of a third of a pound of meat as we do for a quarter-pound of meat at McDonald’s? You’re overcharging us.” Honestly. People thought a third of a pound was less than a quarter of a pound. After all, three is less than four!*

Needless to say, we recalibrated our marketing. The customer, regardless of his or her proficiency with fractions, is always right. So here’s hoping that McDonald’s is counting on the quality and taste of the new Third-Pound Sirloin Burger, rather than the size of its patties, to win market share from premium burger rivals like Shake Shack and Five Guys.

 

(*This anecdote was discussed last year on the website Mother Jones.)

 

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