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Michael Hlinka: Cheers to a company squarely hitting the marketing mark

Money Talks is a business column from CBC radio.
By Michael Hlinka, CBC business columnist:

In my line of work – and that’s commenting on business – it’s really easy to be critical. I tend to be particularly hard on the advertising and marketing professions, and there’s a simple reason why. If I may generalize, they spend most of their time and efforts worrying about the sizzle, when it’s the steak that matters. But today I’m going to lavish praise on McDonald’s Restaurants of Canada, for the smartest and timeliest promotion I’ve seen in a long time: Until this Sunday May 3rd, McDonald’s is giving out free coffee to people who visit one of its stores during morning hours.

That’s right. Free. No strings attached. No other purchases necessary. And available at any of their 1,400-and-some-odd locations.

There’s an interesting back-story behind the timing of this give-away. Last year, McDonald’s switched coffee suppliers. Friends of mine who are big fans of the franchise used to describe the coffee as terrible. Now they claim it’s the best in the marketplace. Clearly, others agree: For the first three months of 2009 compared to 2008, the chain’s coffee sales were up by double digits. But the message wasn’t getting out fast enough … hence the promotion – free morning coffee for two weeks.

The genius works on so many levels.

First, how can you beat “free” during a recession. Coffee sales in restaurants have actually slumped in Canada over the past year as people watch their budgets more carefully. But it’s still a huge market - nearly 2 billion cups were sold last year - and the margins are incredible (in the neighbourhood of 90 per cent). Which means, of course, that the give-away isn’t costing McDonald’s too much. The 10-ounce cup retails for $1.22. My guess is that the “hard” costs to McDonald’s are perhaps 15 cents per. So all in, I’m guessing that the promotion might be costing the company just a little bit more than $1 million. And if I’m right – that’s a bargain.

This is also a template for other marketers about how to get their marketing message right. We are in a recession. People are more conscious of their spending. But when I see advertisement after advertisement on television, it seems that company after company is blissfully unaware/ Let me speak for the typical consumer: I want something of real value, and that doesn’t mean slickly produced commercials with beautiful people and silly pranks. I want you to give me a reason why you deserve my business.

A free trial is about as good a reason as I can think of. So congratulations, McDonald’s, not only for coming up with a great promotion – congratulations for showing everyone else how marketing should be done.

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