McDonald’s doubles down on deals and inexpensive food

McDonald’s is determined to win over budget shoppers.

The fast-food giant has reported nine consecutive quarters of same-store sales growth, even as the chain battles slumping traffic.

Now, McDonald’s is looking to both budget shoppers and wealthier customers to reverse the trend and boost traffic, according to a UBS research report released on Tuesday.

“MCD remains focused on driving positive guest counts, by retaining customers, regaining lost transactions, and converting casual customers,” reads the report from UBS’ Dennis Geiger.

Of the more than 2,000 fast-food eaters surveyed by UBS, the top two reasons customers who said they are eating at McDonald’s more frequently provided to explain their behavior was “good value” and “more promotions.” When asked what factors would make them visit more frequently, the top three answers were “lower prices,” “higher-quality food,” and ” more frequent promotions.”

McDonald’s has targeted these value-seeking customers with deals such as $1 $2 $3 Menu, which has been tweaked to focus more on local offers, and inexpensive breakfast options such as Donut Sticks. Geiger writes that further breakfast plans in 2019 include local value offerings and new menu items.

“Despite a pullback on some of the deeper QSR value offerings, intense industry competition on value still remains and likely will not notably abate in the near term,” Geiger writes.

It is crucial that McDonald’s provide the deals that customers are seeking. More than one in four respondents who said they were eating McDonald’s less explained their behavior by saying that they had less spending money, meaning that a lack of disposable income was the top reason that customers said they were ditching the chain.

Irene Jiang / Business Insider

Recently, declining unemployment and increases in consumer optimism have painted a cheery picture of the American economy. However, many people who regularly eat at fast-food chains continue to struggle financially.

The bottom 40% of American consumers had less discretionary income in 2017 than they did a decade prior, according to a recent study by Deloitte. The next 40% didn’t do much better, with only the top 20% seeing meaningful income gains.

Read more: Millennials’ habits are threatening countless industries — but a new report says it’s only because they’re poorer than their parents

While McDonald’s depends on budget shoppers, it also wants to win over this top 20%. Attracting more affluent customers means higher checks, allowing McDonald’s to fund more expensive projects that can boost the chain’s reputation, such as with its 2018 fresh beef rollout.

Delivery has proven to be one crucial way to win over higher-income customers. McDonald’s recently rolled out its first national advertising campaign to promote its delivery service with Uber Eats.

The average check size of McDonald’s delivery orders is twice as large as traditional orders, according to UBS. Customers in households earning more than $100,000 are ordering delivery more frequently than lower-income customers. These more affluent customers are also significantly more likely than people in households making less than $100,000 annually to say they plan to visit McDonald’s in the next year.

UBS summed up the report by raising its McDonald’s price target to $203 from $185, due in part to the company’s comparable sales momentum.


more recommended stories

  • Disney announced movies through 2027

    Walt Disney Studios plans on keeping.

  • US Senate Banking Committee to hold hearing on Facebook’s Libra

    The US Senate Banking Committee plans.

  • Best Apple design details you probably never noticed before

    Thoughtful design has always been at.

  • 10 maps show how much LGBTQ rights vary around the world

    Last week, Ecuador’s highest court issued.

  • Chick-fil-A is now the 3rd-largest US restaurant chain

    Chick-fil-A has whipped past rivals to.

  • Iran breaks from nuclear deal, makes confrontation with US more likely

    Iran sent shockwaves through the global.

  • Grueling Himalayan effort to retrieve bodies of avalanche-hit climbers

    MUMBAI (Reuters) – Two weeks after.

  • The best kids’ toothbrush of 2019

    You know the old refrain: Good.

  • Target cash register outage leaves frustrated customers across US

    Target faced massive technical difficulties on.

  • Conor McGregor warned by a boxer managed by Mark Wahlberg

    Conor McGregor has been warned by.

  • Now is the best time to buy an Apple Watch

    The Apple Watch is an incredible.

  • Horror movies from the 2000s that are often forgotten

    No one will argue that horror.

  • Toilet paper rolls: The over-vs-under debate explained

    When you walk into the bathroom,.

  • How to change a Samsung Galaxy S10’s screen resolution

    Measuring 6.1 inches and featuring a.

  • 10 plot holes and inconsistencies you might have missed on 'Parks and Recreation'

    While highly praised by critics, NBC’s.

  • There’s no best diet: Bodies respond differently to the same foods

    There are many different ways to.

  • Bernie Sanders calls immigration surge a ‘serious problem’

    Democratic presidential candidate and Vermont Sen..

  • ‘Star Wars Jedi: Fallen Order’: Everything we learned at E3 2019

    On Saturday afternoon in Los Angeles,.

  • Last nun fighting Katy Perry over LA convent: she has ‘blood on her hands’

    The last living nun of the.

  • Katherine Schwarzenegger married Chris Pratt in a California ceremony

    Katherine Schwarzenegger and Chris Pratt took.

  • 4 military phrases that civilians should start using

    Granted, that phrase has several meanings,.

  • Many Uber and Lyft drivers required food stamps because of low pay

    A lengthy article by transportation industry.

  • Trump tweets the moon ‘is a part’ of Mars, criticizes NASA spending

    President Donald Trump on Friday posted.

  • ‘Aladdin’ star’s problem with Tesla known as ‘whompy wheels’

    The star of Disney’s live-action version.

  • Busy Philipps testifies before Congress on abortion bill

    “Cougar Town” actress Busy Philipps shared.

  • Huawei cuts orders to suppliers following US trade blacklist

    Huawei has scaled back orders to.

  • YouTube is ‘suspending’ monetization for Steven Crowder’s channel

    YouTube has said that it’s “suspended”.

  • Do Kylie Skin products actually work, according to an expert?

    Kylie Jenner recently launched her line.

  • Here’s the latest JPMorgan news from CEO succession to technology investments

    JPMorgan has been shaking up executive.

  • Joe Biden’s perceived electability will be tested at the first debates

    Former Vice President Joe Biden is.

  • Apple WWDC 2019: iPad apps are coming to Mac computers

    Apple announced during its WWDC event.

  • Apple’s 2019 iPhones: Rumors, features, and specs

    Apple typically introduces new iPhones each.