When McDonald’s Corp. reduced the price of its Big Mac by 75 percent if customers also purchased french fries and a soft drink, The Wall Street Journal reported that the company was hoping the novel promotion would revive its U. S. sales growth. It didn’t. Within two weeks sales had fallen. Using your knowledge of game theory, what do you think disrupted McDonald’s plans?
Based on the given information, it can be inferred that McDonald's strategy of reducing the price of the Big Mac by 75 percent, when customers also purchased french fries and a soft drink, did not result in increased sales growth. To analyze what could have disrupted McDonald's plans, we can consider a potential game theoretic perspective.
1. Limited Appeal: One possibility is that the promotion did not appeal to a large enough segment of customers. Despite the price reduction, customers may not have been interested in purchasing the additional items (french fries and a soft drink) to avail the discount. This could have limited the effectiveness of the promotion in driving overall sales growth.
2. Competitive Response: Another factor to consider is the response of competitors in the fast-food industry. If rival restaurants offered similar or more attractive promotions during the same period, customers may have chosen to dine elsewhere, leading to a decline in McDonald's sales despite the discount.
3. Perceived Value: It is also possible that customers did not perceive sufficient value in the promotion. Although the price reduction may have seemed significant, customers may have believed that the additional costs of purchasing the fries and soft drink outweighed the discount. As a result, they may have chosen to forego the deal and opt for alternatives.
4. Consumer Behavior: McDonald's may have failed to accurately predict consumer behavior in response to the promotion. Customers might have perceived the promotion as a short-term gimmick and chose not to change their habits or preferences. This could have weakened the impact of the promotion and resulted in a decrease in sales.
5. Promotional Execution: Lastly, it's essential to consider the execution of the promotion. Factors such as limited marketing, poor communication of the promotion to the target audience, or operational challenges in efficiently implementing the offer across all locations could have influenced customer uptake and ultimately impacted sales growth.
It is important to note that without additional information, it is challenging to pinpoint the exact reason for the disruption of McDonald's plans. Factors such as external market conditions, changing consumer preferences, and strategic decisions made by the company could all have influenced the outcome.
To analyze the situation using game theory, we need to understand the incentives and strategies involved. Game theory is a mathematical framework that helps analyze and predict the strategic behavior of individuals or companies in decision-making situations.
In this case, we have McDonald's reducing the price of its Big Mac by 75 percent if customers also purchase french fries and a soft drink. The expectation was that this promotion would revive sales growth in the U.S.
To understand what disrupted McDonald's plans, we need to consider the incentives of both the company and the customers. McDonald's had an incentive to boost its sales, while customers had an incentive to take advantage of the discounted Big Mac.
One possible explanation for the failure of this promotion could be the strategic behavior of customers. Game theory suggests that individuals or players make decisions based on their anticipated outcomes and the actions of others.
It is possible that customers anticipated that McDonald's would reduce the price of the Big Mac in the future or offer other promotions. Therefore, they might have delayed their purchases in the hope of getting an even better deal.
Moreover, customers may have strategic preferences for specific food items. For example, some customers might prefer only the Big Mac and not be interested in adding french fries and a soft drink. Thus, they might have chosen not to take advantage of the promotion.
Additionally, customers may have been concerned about the quality or taste of the french fries and soft drink, which could have deterred them from purchasing the combo.
It is also essential to consider external factors that could influence customers' decisions, such as competition from other fast-food chains or economic conditions.
To get a better understanding of what specifically disrupted McDonald's plans, further analysis would be required, such as conducting customer surveys, analyzing sales data, and considering market research.