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.

Source

more recommended stories

  • Oka B Georgia Matte Ballet Flat review: water-resistant flats

    When it rains during the summer,.

  • A mom set up a job fair after her kids wouldn’t stop asking for money

    One mother — whose kids kept.

  • Goldman Sachs plans to recruit more than 100 coders to its trading division as part of the bank’s largest hiring spree in years (GS)

    Brendan McDermid/Reuters Goldman Sachs is looking.

  • How dangerous is fluoride in water? Treatment may hurt kids’ IQ

    Fluoride prevents cavities, there is no.

  • Here’s what life is like on the Syria-Turkey border as tensions rise

    Turkey’s involvement in the ongoing Syrian.

  • The best MTV VJs through the years

    On August 1, 1981, MTV broadcast.

  • Immigrant Gristedes Foods billionaire John Catsimatidis: ‘Build a wall’

    John Catsimatidis built a fortune operating.

  • 5 time-saving tricks I used to make $106,421 on the side while working a demanding 9-to-5 job

    Luisa Zhou helps people start their.

  • Even Trump now says US companies like Apple may pay for China tariffs

    The Trump administration gave the public.

  • What Costco looked like when it first opened in 1983: photos

    Costco is a staple of the.

  • Ghislaine Maxwell In-N-Out Burger photo may be Photoshopped, doctored

    In the weeks after Jeffrey Epstein’s.

  • Dispensed Business Insider weekly healthcare newsletter August 16

    Just when you think you’re headed.

  • Ghislaine Maxwell’s In-N-Out order included burger, drinks

    Jeffrey Epstein’s death by apparent suicide.

  • ‘The longer the trade war goes on, the weaker China gets’: Trump doubles down on tariff threats despite recession concerns

    NICOLAS ASFOURI/AFP/Getty Images Even after a.

  • How to unsubscribe on your Snapchat Discover page

    If you’ve found yourself looking for.

  • Big tech warned by FTC chairman: We will break you up if we have to

    The chairman of the Federal Trade.

  • Sam Pratt flew 33 family members to Hawaii using frequent flyer miles

    A grandfather took 33 of his.

  • Male UFC fighter Henry Cejudo challenges Valentina Shevchenko to fight

    UFC fighter Henry Cejudo says he.

  • Texas woman says her dog died after being exposed to blue-green algae

    Another woman is sharing that her.

  • Man says he planned to travel to Hawaii with ex-girlfriend after split

    For many, hanging out with an.

  • Bianca Andreescu called Serena Williams ‘a beast’ after Rogers Cup win

    Bianca Andreescu gave Serena Williams a.

  • Withings Steel HR hybrid smartwatch review 2019

    I’ve tried just about every smartwatch.

  • ‘It’s far-fetched’: Legal experts doubt conspiracy theory about Epstein

    Convicted sex offender Jeffrey Epstein’s death.

  • New York Times story about wedding workouts is damaging, experts say

    It started innocently enough, with a.

  • America’s most-visited tourist attractions — and where to go instead

    Famous tourist attractions can be pricey.

  • Meghan Markle can’t return to acting, Kevin Costner says

    When it comes to the Duke.

  • Antonio Brown reportedly got caught trying to repaint his old helmet

    Antonio Brown has had a weird.

  • Josh Wilkerson died after taking $25 over-the-counter insulin to cut costs

    A 27-year-old man with diabetes died.

  • Trump speaks in El Paso following Saturday mass shooting at Walmart

    President Donald Trump visited El Paso,.

  • Anniversary of U-2 spy plane accidental first flight in 1955

    On August 1, 1955, a prototype.

  • 8chan: The story behind the site’s owner, Jim Watkins

    The man who owns and operates.

  • YouTuber Soph threatens company HQ after being barred for hate speech

    A 14-year-old far-right YouTuber with nearly.