McDonald’s is planning to invest “hundreds of millions of dollars” to upgrade its digital marketing capabilities over the coming years as the major fast-food giant shifts more of its marketing spending toward those channels.
According to a system message this morning, seen by Restaurant Business, McDonald’s plans to create a digital marketing fund in the U.S., accounting for 1.2% of franchisees’ digital revenues, starting in 2025.
Franchisees will pay for the digital marketing fund through existing marketing contributions. The company estimates that the contribution shifts will actually improve a typical store’s cash flow by about $2,600 per year.
The plan is to shift spending away from marketing that has a lower return on investment and into digital marketing. It is uncertain what areas of marketing McDonald’s plans to cut to shift spending toward those digital channels, as those decisions will likely be made in conjunction with franchisees. Some of it could come from local marketing.
“We have already begun to evolve our marketing approach in many markets by balancing our traditional mass media spend with investment in digital marketing capabilities that personalize the customer experience,” McDonald’s Global Chief Marketing Officer Morgan Flatley said in the message, sent to employees and franchisees.
McDonald’s own investments alongside this spending are designed to keep the chain’s foot on the digital gas pedal. Digital sales have helped the Chicago-based burger giant grow overall sales in recent quarters despite an uncertain consumer environment.
The chain has also quickly become one of the most popular loyalty programs in the industry, with 150 million active users globally and 34 million in the U.S., which was higher than Starbucks.
In her message, Flatley said that McDonald’s would invest in new ordering channels, including the ability for customers to order through the web without downloading its app.
She also said the company would work to improve personalized order recommendations and “next-generation loyalty,” such as increasing the ways customers can use their loyalty points.
McDonald’s next year will shift funding for its digital marketing tools, including its mobile app and customer relationship management system, into its digital marketing fund. Five global markets, the U.S., Australia, Canada, Germany and the U.K., will adopt that approach initially.
“Maintaining our leadership position requires modernizing our marketing model to personalize how we reach, serve and connect with our fans,” Tariq Hassan, McDonald’s U.S. chief marketing and customer experience officer, and Whitney McGinnis, U.S. chief information officer, said in a system message, seen by Restaurant Business.
They added that the company will work with franchisee leadership on how to incorporate digital marketing costs into the marketing budget, and how the change will factor into McDonald’s 2025 plans in the U.S.
“We have an exciting opportunity to take our marketing strategy to the next level,” they said. “This funding model will help us better understand consumer behavior and optimize customer lifetime value, all while maintaining systems for data management, network security and data storage.”
UPDATE: This story has been updated to clarify that the digital marketing fund will come from digital sales.
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