McDonald’s Finds a Little Free Coffee Goes a Long Way

McDonald’s Finds a Little Free Coffee Goes a Long Way

Introduction

In my last post[1], I explored the different geographic strategies Tim Hortons, Starbucks and McDonalds use in Canada. These strategies led to clear geographic segmentations. Based on the data, I identified provinces with the potential for preference change in the coming months. It was these provinces that QSR competitors should focus on.

But geography isn’t the only strategic difference. The three QSR giants also employ different marketing strategies. Starbucks uses enticements, like two-for-one or 50 per cent off deals, to bring people through they doors. Tim Hortons focuses on their annual Roll-up-the-Rim contest, the largest QSR promotion in Canada. Meanwhile, McDonald’s takes a community-centered approach, running local charity drives (like McHappy Days) throughout the year. Which of these three different strategies has been most effective?

Twitter Analysis

During August 2013, I used online social media sampling[2] to collect 14,195,003 tweets from 57,867 Canadians, spanning January 15, 2013 – May 31, 2013. The tweets were analyzed for mentions (including common nicknames and aliases) of Tim Hortons, Starbucks, McDonald’s, and many other Canadian QSRs.

The sampled time frame had many interesting and important events for each QSR. Starbucks ran several coupon campaigns, including the Canada’s largest Living Social deal. Tim Hortons’ Roll-Up-the-Rim contest ran during this period. McDonalds ran a nationwide Free Coffee campaign as well as their popular McHappy Days community program benefitting local charities. These campaigns all generated substantial social traffic. Each QSR had roughly similar numbers of tweets and authors to analyze.

The percentage of mentions per thousand tweets (denoted as Parts Per Mil or PPM) are plotted versus time. Campaigns appear as large peaks against the background level of mentions. I analyzed changes in the time series mean and variance using the change point algorithm[3] with binary segmentation[4]. Change point analysis identifies places where the time series statistics change significantly. The mean value from the change point analysis is plotted over the time series.

Coupons

Starbucks excels at coupon campaigns. During the study period, Starbucks ran 2 daily deal campaigns offering 50% off a prepaid Starbucks card and a half-off Frappuccino coupon. The first daily deal campaign, run on Living Social, was the largest daily deal campaign even in Canada.

Figure 1 shows the change point analysis for Starbucks with the major campaigns marked. The Living Social campaign provided nearly four times the mentions over the typical baseline. The GroupOn and Half-Off Frappuccino coupons didn’t fare nearly as well, providing about a two-fold increase in weekly mentions.

starbucks_changepoint

Figure 1: Starbucks Share of Voice

What is most interesting is that coupons have little lasting effect on brand mentions. After the coupon campaign, mentions go back to their previous levels. This suggests that coupons do not attract new customers to the brand, but instead maintain good will with existing customers.

Contests

Tim Hortons’ Roll-up-the-Rim campaign is the largest contest in Canada, accounting for the lions share of Tim Hortons’ annual promotional budget. Because of its popularity, Tim Hortons rarely runs additional campaigns during the year. This contest needs to be big — and it is!

Figure 2 shows the share of voice for Tim Hortons. There is already anticipation one week before the contest starts. Mentions spike to two and a half times their baseline. When the contest begins, mentions increase three times. This elevated mention rate continues throughout the six-week contest duration.

timhortons_changepoint

Figure 2: Tim Hortons Share of Voice

It if a different story once the contest ends. Rather than returning to the pre-contest baseline, the mention rate drops to a lower rate (statistical significance 95%). This drop in mentions signals brand fatigue. People have been so inundated with the Tim Hortons’ brand during the contest, that brand awareness enters a refractory period — people need time to recover. Eventually, the mention rate will return to the pre-contest level, but the time required is longer than covered in this study.

This analysis shows that contest campaigns sacrifice long term brand growth for short term gain. The brand lift during the contest is significant and spectacular, but overall brand discussion decreases once the contest is over.

Community

McDonald’s traditionally focuses on the local neighbourhood. Whether it is Free Coffee (timed to coincide with the start of Tim Hortons’ Roll-up-the-Rim) or McHappy Days, there is always a grass-roots component to their campaigns. This community focus seems to be paying off.

Figure 3 shows how McDonald’s approach is fairing. Spikes associated with their campaigns produce significant increase in brand mentions. McHappy Days benefitting local charities – the most community focused campaign – has the largest spike seen among any QSRs in this study: a five times increase over the average baseline.

 

mcdonalds_changepoint

Figure 3: McDonalds Share of Voice

Figure 3 shows how McDonald’s approach is fairing. Spikes associated with their campaigns produce significant increase in brand mentions. McHappy Days benefitting local charities – the most community focused campaign – has the largest spike seen among any QSRs in this study: a five times increase over the average baseline.

Following each campaign, McDonalds sees a small brand lift (significant to 95%). Their community focus adds an incremental increase to their share of voice. Of the three campaign types analyzed, this strategy is the only one that brings consistent long term brand lift to the organization.

Conclusion

All three of the QSR companies in this study — Starbucks, Tim Hortons, and McDonald’s — ran significant marketing campaigns during this period. Interestingly, each scheme focused on a different strategy:
Starbucks on coupons, Tim Hortons on contests, and McDonald’s on community. While each campaign saw significant spikes in brand mention, only the local-focused strategy generated consistent long-term brand lift.

When seeking brand lift on social media, it seems that the more local the campaign, the more likely the brand is to see long-term benefits. Even offer schemes (like McDonalds’ Free Coffee) can see steady gains if tied to the local community. Conversely, marketing campaigns that last for a long time (like Tim Hortons’ Roll-up-the-Rim) can lead to brand fatigue and may result in a decrease in brand mentions in the long run.

Featured “Mccafe” Image courtesy of César View CC License

Footnotes    (↵ returns to text)

  1. http://xplane.us/where-you-live-impacts-where-you-go-for-coffee/
  2. K. White, J. Li, N. Japkowicz, “Sampling Online Social Networks Using Coupling From the Past,” 2012 IEEE 12th International Conference on Data Mining Workshop on Data Mining in Networks, pp. 266-272
  3. J. Chen and A. K. Gupta, Parametric statistical change point analysis, Birkhauser (2000)
  4. A. J. Scott and M. Knott, “A cluster analysis method for grouping means in the analysis of variance,” Biometrics, vol. 30, pp. 507-512, 1974

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