It's not that I don't like McDonald's
The junk-food incentive
On Dec. 6, Advertising Age reported that McDonald's was placing Happy Meal coupons on report cards. The company picked up the $1,600 cost of printing 27,000 report cards for elementary-school kids in Florida, in exchange for including its coupon on report-card covers. Kids who earned all A's or B's, or met some other basic criteria, "earned" a free Happy Meal. For a fraction of the cost of traditional advertising, Mickey D's got its message delivered directly to a highly desirable young audience.
Nutrition strikes back
Not surprisingly, several consumer groups and parents aren't happy. One parent quoted by Advertising Age fumed that her daughter now believes her good grades entitle her to a Happy Meal. Sadly, this McMisstep follows the company's considerable progress in dismantling its former image as an "evil" company out to stuff kids with junk food. Among other savvy moves, the company added healthier fare to its menu, and it's agreed to limit the amount of advertising it aims at children under the age of 12.
Whether the report-card tactic was right or wrong, it occurs to me that somebody over at McDonald's needs a lesson in value investing. Sure, you got a great deal on targeted advertising to a lucrative demographic. But was it really worth the bad publicity, especially when the public had finally begun to give you the benefit of the doubt?
What's that rumbling sound?
I'd consider this the advertising equivalent of what Warren Buffett described as "picking up pennies in front of a bulldozer." Sure, you can make some money doing it, but if goes wrong, you have a serious problem on your hands. In investing parlance, that's what we call an asymmetric payoff -- in this case, in the wrong direction!
Companies need to better recognize the link between "doing well" and "doing good." In today's social and economic environment, choosing the latter isn't just the right thing to do -- it's often the right business decision, too.
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Fool contributor Rimmy Malhotra is a New York City-based money manager. He owns shares of McDonald's. He welcomes your feedback at email@example.com. The Fool's disclosure policy will just have a salad, thanks.