It’s a race to the bottom when you train your customers to wait to pay less.
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To spur growth, McDonald’s used discounts to sway budget-conscious customers. McDonald’s planned to boost sales with World Cup and K-pop Demon Hunters meal discounts, an under-$3 menu, and in-app promotions, but it didn’t work as expected.
In its last quarterly earnings report, the company reported that U.S. same-store sales grew 0.8 percent in Q2, down from 3.9 percent in Q1 and below the 1.06 percent analysts expected.
The chain acknowledged it launched too many promotions at once, which strained restaurants and increased customer wait times, but blamed the stateside slowdown on poor strategy execution. As a result, the company replaced longtime U.S. business head Joe Erlinger with COO Skye Anderson.
McDonald’s discounts haven’t reversed slowing U.S. growth, offering a powerful lesson for founders on why discounts aren’t a great growth strategy, and what to do instead.
Refreshed leadership advice from CEO Stephanie Mehta
Regular discounts train customers never to pay full price
Lower-income diners, traditionally the primary source of fast-food traffic, have cut back on dining out as inflation has raised the cost of food, housing, and energy. Even with discounts, McDonald’s consumers are being priced out.
Discounts have another effect: offering them regularly changes consumer buying psychology. This makes price the primary driver rather than quality, need, convenience, or brand loyalty.
You train consumers to expect discounts and never to buy your products and services at full price. Regular discounts push your pricing toward the bottom to keep sales going. You also attract clients who aren’t a good fit because they care mainly about price.