McDonald's Polishing Its Arches

I read an interesting article last week in the Hollywood Reporter -- seems McDonald's (NYSE: MCD  ) wants to change its approach to marketing. The trade paper quotes Dean Barrett, senior vice president of worldwide marketing at Mickey Dee's, as dissatisfied with traditional promotions the company has used: "We no longer ask for a stand-alone event or game or a licensed character tie-in just for the sake of having it."

Instead, the burger-flipping concern wants to customize promotions in a way that organically includes the brand equity of Ronald's chain in a more extroverted fashion -- the phrase used was "entertaining marketing." Barrett was addressing a conference put on by the Promotion Marketing Association, and he used the example of the "I'm Lovin' It" program, featuring Justin Timberlake, which successfully connected with the valuable demographics associated with Viacom's (NYSE: VIA  ) MTV cabler.

The essential implication is obvious: McDonald's is wary of just hawking merchandise and properties for others. And I have to imagine that the exclusive promotional pact that the company entered into years ago with Disney (NYSE: DIS  ) , which expires in 2007, is wearing on its nerves. At the time the long-term contract was signed, there was a ream of analysis dedicated to the fact that it seemed to be a rather limiting deal overall for McDonald's.

Sure, Disney is a great partner and has added a ton of value to the Golden Arches, but the cost of lost opportunities is a concern. For example, McDonald's might have made a better promotional partner with Lucasfilm and Fox (NYSE: FOX  ) on the release of The Phantom Menace than PepsiCo (NYSE: PEP  ) and Yum! Brands (NYSE: YUM  ) did.

What McDonald's wants is more than understandable. Think about it: When the Monopoly game is on, who benefits more -- the home of the Big Mac, or Hasbro (NYSE: HAS  ) ? It's hard to say, but I think more about Boardwalk and Park Place than I do about Quarter Pounders and McNuggets when I participate. But if I were Barrett, I would not necessarily give up on "stand-alone events," as I think they can create an increase in traffic just as well as anything else; the biggest factor is probably the cost-effectiveness of the given method.

McDonald's is certainly upping the ante in terms of making its restaurants a differentiated piece of fast-food real estate. Ronald means business. He's ready to offer a DVD to go with your cheeseburger or include a rocking tune with your Happy Meal. McDonald's is also interested, according to Barrett, in finding a way to work with Pixar (Nasdaq: PIXR  ) , even though the animation studio decided to take a pass on a future relationship with Disney. One has to wonder what a Pixar/McDonald's promotion would be like in the new era of "entertaining marketing." Maybe Steve Jobs and his brilliant computer animators could create talking CGI versions of hamburgers and fries that try to escape the fate of being served to the hungry masses (Drive-Thru Story, anyone?).

I can't wait to see where this new attitude leads McDonald's (hopefully to a higher share price, of course). But a big word of caution: Before the powers that be get too caught up in brainstorming new promotional schemes, make sure the product tastes good and is served as quickly as possible. That's the bottom line with the fans of food served fast.

Fool contributor Steven Mallas owns shares of Disney.


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