There is a great article about McDonald’s in this Ad Age article, http://adage.com/article?article_id=136601.
It talks about the long road McDonald’s has taken since 2002 to achieve profitable success. Ad campaigns focusing on the Big Mac, Quarter Pounder with cheese and chicken nuggets have stimulated demand for the items, making the quickservice chain less reliant on its lower-margin Dollar Menu items. “In the last eight months, we have placed greater emphasis on flagship-quality products,” McDonald’s USA Chief Marketing Officer Neil Golden said.
In essence they have suspended promoting the dollar menu while their competitors have carried on making up to 15% of Wendy’s sales (down from 20%) while McDonald’s Dollar Menu accounting for only 10% of overall sales. This means competitors are driving down profits and their ability to compete with the very giant who started the concept.
For retailers, we often believe the “loss leader” will increase volume but for many, particularly those without a sales training program, it erodes margins.
Just because the other guy is discounting either the hot new swimsuit or the leftover Webkinz, doesn’t mean you should join them. Look at your market.
If McDonald’s can change and only promote their high profit items during an economic recovery, why can’t you?