Is loyalty the biggest driver of digital adoption?
- Joe Carrick-Lawson
- Nov 17, 2023
- 8 min read
Figure 1: Graphic for the release of MyMcDonald's Rewards (McDonalds, 2021b)
Chris Kempcziski, the CEO of McDonald’s stated that ‘loyalty is the single biggest driver of digital adoption’ (Marketing Week, 2022). With an increase in customers using apps for fast food, following the popularisation of smart phones for convenience and the Covid pandemic limiting in-store sales, McDonald’s is prioritising its own app, along with a new loyalty programme, to surpass their competitors. As a result, in July 2021, McDonald’s launched its first loyalty programme, MyMcDonald’s Rewards, in which customers earn points for every purchase through the app, which can be used to redeem items for free at set amounts (McDonald’s, 2021a). Since its release, McDonald’s have seen positive engagement via its app. However, despite the benefits of the programme, factors aside from loyalty may be more important in the increase in digital adoption.
Founded by Maurice and Richard McDonald in California in 1940, and later being made into a franchise by Ray Kroc in 1955 (Encyclopaedia Britannica, 2022), McDonald’s is the most popular fast-food brand globally, operating and franchising 40,275 restaurants (Statista, 2023a), serving approximately 69 million customers per day (Zippia, 2023), and having a revenue of $23.18 billion in 2022 (Statista, 2023b). The company has always strived for efficiency and customer satisfaction, with the first restaurants designed using the “Speedee Service System” which used a limited menu, self-service counters, and heat lamps to deliver food quickly and cheaply (Encyclopaedia Britannica, 2022). This appeals to a wide range of demographics, thus McDonald’s core values are: serve (putting customers first), inclusion, integrity, community, and family (McDonald’s, 2017). These innovations and diverse approaches allow McDonald’s to become a notable part of an area, and one that aims to be accessible and efficient for various people in various situations, whether it is in-stores, via a Drive-thru, or through McDelivery.
However, being a fast-food restaurant means McDonald’s has lots of competition, from other franchises and from local business who can deliver via third-party apps. Therefore, customer loyalty is affected as consumers have a multitude of options competing for their patronage, so loyalty programmes are often employed to try and maintain the positives of familiarity with the added benefit of a lower price to returning customers. This allows companies ‘to offer the consumer a high perceived value from regularly shopping at one brand and in turn to receive higher average sales and revenue per customer’ (Kingsnorth, 2022: 328). This aims to make the company be perceived as ‘being superior in at least one of the dimensions defining the category’ (Aaker, 2011: 10), in this case being cheaper than competitors in the long term. McDonald’s demonstrated this by launching MyMcDonald’s rewards in July 2021, a loyalty programme designed to appeal to any customer in any situation. By using the app, customers can scan their personal code when ordering and earn one point per one penny they spend. For certain amounts of points, this could then be exchanged for an item. For example, the signature Big Mac can be acquired for 4000 points (or once a customer has spent £40 on purchases with their code) (McDonald’s, 2022). This is effectively a 10% discount, as after nine purchases of a chosen item, enough points will be accumulated to exchange for the same item for free. It is a discount that anyone can take advantage of, but a discount that incentivises repeat customers for the greatest reward.
Customers are inclined to continually use loyalty programmes through operant conditioning, as Skinner states: ‘a type of learning in which behaviours is influenced by the consequences that follow it’ (1938: 14). Consumers are advertised a perception of a cost-effective system in the long run, and feel predisposed to sign up through negative reinforcement, where behaviours are encouraged ‘by removing unpleasant or adverse stimulus’ (O’Brien, 2020: 133). In this case, the negative outcome is a loss of money, as consumers either use the app and will get a free item later or won’t and those points and rewards are not redeemable. For a customer who is already planning to have McDonalds, getting some free points as well seems like a logical step, and as points build up, customers are conditioned to choose McDonald’s to reach the nine-order quota, as spending money elsewhere does not get them closer to the reward. This is further typified in digital marketing by advertising and direct notifications about the programme, allowing for reminders and exposure that is difficult to ignore. The popularity of Rewards is evident, as monthly active app users in the US has risen from approximately 18 million before the launch in July 2021, to 30 million in July 2023 (Similar Web, 2023).
Figure 2: Monthly Active App Users in the US of McDonald's and its closest app competitors between 2021 and 2023 (Similar Web, 2023)
However, despite an increase in the MyMcDonald’s app’s popularity in 2021 when MyMcDonald’s Rewards were introduced, achieving 40 million active users in its biggest six markets after the launch (Reuters, 2021), other factors may be more important for the app’s success. In the post-lockdown digital age, consumers have become more reliant on and accepting of apps to complete tasks. This is due to the benefits through time efficiency, personalisation, and accessibility. Specifically, as Bhattacharjee et Al. notes, fast food apps ‘offered convenience, order real-time updates, estimated delivery times, delivery status, and safe options with minimizing contact with others during the pandemic [which] helped build customer trust and encouraged them to use the apps more frequently’ (2023: 3). Rewards may reduce the price for the consumer, but these factors mean, overall, the app reduces the cost for the consumer. Originally defined by Lauterborn, ‘the total cost will consider […] time in acquiring a good […], conscience by consuming or even […] guilt’ (Walletzký, 2014: 2). The MyMcDonald’s app allows for quick customisation options to find an item and to add or remove ingredients, delivery to your home or for a pick-up so the order is ready for when the customer arrives, and the use of digital wallets, making it quicker and easier for the consumer to complete their process. Furthermore, as it is completed via a mobile phone, a personal and portable device, it is accessible at any time of the day. This speed and virtual accessibility also benefit the company, as less people are crowding the stores, deterring customers, and negatively effecting employees due to it being ‘stressful, making people quicker, less exploratory and more inclined to omit purchases’ (East et Al., 2022: 246). Additionally, customers are more likely to spend more as they are not using physical money, thus are less likely to associate digital wallets with a loss.
Another benefit of the app is the personalisation options, which benefit the customer as their preferences are considered, but also the company as it allows for more effective advertising and tracking. Narang and Shankar discuss that ‘mobile devices are uniquely tied to an individual and allow marketers to leverage data on individual preferences, movement patters, co-located social connections, and other individual-specific variables to personalize advertising and marketing communication messages’ (2019: 103). For the MyMcDonald’s app to work the most effectively for the consumer, permissions for location, notifications, and data sharing must be enabled. This benefits the customer as it automatically finds the closest restaurant to them, remembers their address and bank details, and sends notifications about the products they would most like to hear. Although, this also provides a benefit to the company, as this data allows for the more effective advertising by having specific deals sent directly to a device used frequently by the consumer, creating a more personal business to customer interaction.
In contrary, the loyalty system only provides an extension to the app’s incentives, rather than a primary positive. Rewards is more useful in tracking, as it can be connected in-stores and at drive-thrus. However, this reduces the overall cost for the consumer, as it creates an extra step that wastes time. To use it, a QR or numerical code is required to log-in. The added hassle of taking out a phone, unlocking it, opening the app, finding the codes, and then fiddling around with the scanner or communicating it to an employee detracts from the quick and easy experience that fast-food restaurants are designed to create. Therefore, this only benefits users already planning on using the app, as Rewards are connected automatically. Customers value convenience and efficiency more than price, hence why delivery apps are popular, as the price of the service charge is often seen as negligible to the benefits of saving time and effort.
Overall, regardless of the claim by Kempcziski, loyalty through MyMcDonald’s Rewards may not be the biggest driver of digital adoption. The app offers more advantages through accessibility, efficiency, and customization which are more important to the increase in the app’s adoption, rather than the loyalty system it contains. This is evident as there was not a substantial increase in active users in July 2021 when the launch occurred, instead (as displayed in Figure 1) there has been a consistent overall increase since January 2021, before Rewards was available. Whereas the loyalty system does allow for cheaper meals in the long term, the other features of the app provide a more consistent, universal, and effective benefit to the consumer, whist still providing the benefits of efficiency and tracking for the company. Therefore, lowering price through loyalty is not the main driver for digital adoption, instead it is lowering cost using fast-food apps.
Bibliography
Aaker, David (2011) ‘Brand Relevance: Making Competitors Irrelevant’, San Francisco: Jossey-Bass
Bhattachajee, Abhilash; Rao, Kunja Sambashiva; and Nawaz, Nishad (2023) ‘Determinants and Outcomes of Food Delivery App Engagement During COVID-19: A Study of Urban and Semi-Urban Customers’, Journal of Electronic Commerce in Organizations, Vol. 21, No. 1
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Webography
Encyclopaedia Britannica (2022) ‘McDonald’s’, Available at: https://www.britannica.com/topic/McDonalds (Accessed: 25th October 2023)
Marketing Week (2022) ‘McDonald’s new loyalty scheme has ‘exceeded expectations’ as digital sales jump’, Available at: https://www.marketingweek.com/mcdonalds-loyalty-scheme-digital-sales/ (Accessed: 25th October 2023)
McDonald’s (2017) ‘Our Mission and Values’, Available at: https://corporate.mcdonalds.com/corpmcd/our-company/who-we-are/our-values.html (Accessed: 25th October 2023)
McDonald’s (2021a) ‘Loyalty Never Tasted So Good… MyMcDonald’s Rewards is Almost Here!’, Available at: https://corporate.mcdonalds.com/corpmcd/our-stories/article/loyalty-rewards.html (Accessed: 25th October 2023)
McDonald’s (2022) ‘Start Earning on MyMcDonald’s Rewards!’, Available at: https://www.mcdonalds.com/gb/en-gb/good-to-know/in-our-restaurants/my-mcdonalds-app/rewards.html (Accessed: 29th October 2023)
Reuters (2021) ‘McDonald’s creates new unit to focus on global digital app’, Available at: https://www.reuters.com/business/retail-consumer/mcdonalds-creates-new-unit-focus-global-digital-app-2021-07-26/ (Accessed: 12th November 2023)
Similar Web (2023) ‘McDonald’s Now has 55% More App Users Than Starbucks’, Available at: https://www.similarweb.com/blog/insights/ecommerce-news/mcdonalds-starbucks/ (Accessed: 29th October 2023)
Statista (2023a) ‘Number of McDonald’s worldwide from 2005 to 2022’, Available at: https://www.statista.com/statistics/219454/mcdonalds-restaurants-worldwide/#:~:text=Global%20foodservice%20retailer%20McDonald's%20operated,for%20the%20last%2017%20years. (Accessed: 25th October 2023)
Statista (2023b) ‘Revenue of McDonald’s worldwide from 2005 to 2022’, Available at: https://www.statista.com/statistics/208917/revenue-of-the-mcdonalds-corporation-since-2005/ (Accessed: 25th October 2023)
Zippia (2023) ‘22 McDonald’s Statistics [2023]: Restaurant Counts, Facts, and Trends’, Available at: https://www.zippia.com/advice/mcdonalds-statistics/ (Accessed: 29th October 2023)
Figures
McDonalds (2021b) 'Start earning on MyMcDonald’s Rewards!', Available at: https://www.mcdonalds.com/gb/en-gb/good-to-know/in-our-restaurants/my-mcdonalds-app/rewards.html (Accessed: 10th September 2024)
Similar Web (2023) ‘McDonald’s Now has 55% More App Users Than Starbucks’, Available at: https://www.similarweb.com/blog/insights/ecommerce-news/mcdonalds-starbucks/ (Accessed: 29th October 2023)
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