4 ms·

Why Pizza failed at McDonalds

19 points by karjaluoto 16y ago

blantonl 16y ago
I worked at McDonalds as a teenager and in college. Our store owner seemed to be enjoy being a test-bed for new products or concepts that actually made it out of the labs. Some things our store did while I was there: * Fried Chicken. Yup, McDonalds fried chicken. We installed this huge vat in the back of the store and boxed up greasy fried chicken. And it sold pretty well. * Home delivery. I'm not kidding, we actually implemented a home delivery concept where the customer would call in an order to some call center, and out popped an order on a special printer in the store. Someone would box up the order, and drive it over to the customers house. It was a pain in the butt from a resource scheduling perspective, but a wonderful thing for the hamburger-flippers (tips, and 15 minutes away from the store in the car)
- tptacek 16y ago
  When you look at it through the lens of McDonalds having tens of thousands of testbeds to expiriment with, the conclusion you draw might be exactly the opposite of the one the article makes. It's not that McDonalds should stick to its knitting. It's that they have billions of dollars and one of the 5 best retail infrastructures in the world to develop and test concepts with. Of course they're going to try lots of things that don't work out. That doesn't mean "stick with the burgers"; it means, "stick with the things that are scalable and compatible with McDonalds". Pizza happens not to be one of them. Coffee, on the other hand? Appears to have made it out of the testbed.
  - crux 16y ago
    I agree. Marketing anecdotes are always fun to read, but it seems like nearly every marketing expert that comes through these pages is suffering from a serious case of post hoc, ergo propter hoc with a side effect of confirmation bias. The nature of business competition is such that this author, or Malcom Gladwell, or whoever happens to be trying to find a thread of causality that they can build a strategy out of, is nearly always going to be able to find a dozen examples that bear out a given strategy, and a dozen that clearly argue for its opposite. But 'differentiate yourself early with a product that fits the needs of the market and low overhead, grow steadily, and once you become big enough to sustain multiple operations, devote some resources to experimentation in order to keep your brand vital without diluting your core message; also, make friends with governmental agencies' doesn't roll off the tongue, and doesn't seem to the be cutting insight we're looking for. The only one-sentence business strategy I've heard of seems to be 'Work hard, even if you don't see any immediate payoff, and get a little lucky.' Of course then again the fact is that most business authors are not as good as the people actually working at MacDonalds and their ilk. The author sees the way things are and can only conclude it's because they're following a natural and immutable law: MacDonald's pizza failed because it didn't conform to their natural state. But as you point out, Coffee (and biscuits) are just as unnatural if you assume that your 'one thing' is what you are right now, which is a burger stand. The reason that nearly all businesses succeed is because they have been shrewd—or lucky—enough to decide on their own form. Paring down to your core competency—which is tacitly assumed to be the thing you're best at RIGHT NOW—is sometimes a part of this process, as is experimenting with new shapes, as is finding previously-undetected connections between the two.
    - karjaluoto 16y ago
      I'd love for you to read the rest of the book (several chapters are already online for free). I'd be interested in seeing how you feel about it after doing so. We've worked with a number of small organizations in helping them find their stories and tell them. Largely, what we've come back to is similar to what you're stating here: there are very few immutable rules. You just have to figure out what you're doing, try things out, and make the best choices you can. The challenge for the marketer (or writer in this case) is to try to find patterns and distill meaning from them. The truth is, marketing--and business success--is hard to pin down, or repeat. Nevertheless, owners of small companies often seem to think (erroneously) that the big guys have it all worked out, and that it's easy for them. What I worked to do with this book, was outline a set of good, solid suggestions, peppered with anecdotes relating to those who seem to have been successful, as well as those efforts that haven't. It's imperfect, but I believe there are useful suggestions in there; it's up to the reader to determine what might work for them. For the record, I like the strategy: "Work hard, even if you don't see any immediate payoff, and get a little lucky." The tough part is that there are a number of other questions that such a suggestion won't help answer. At those times, we have to dig deeper and get into the more gray areas. It's harder to make clear and irrefutable statements about those, but no less important to try to find some plausible arguments.
    - crux 16y ago
      karjaluoto: I will happily read the rest of the chapters you've got up there, as I quite like your writing style. Though, as I said above, I do think that some of the overall conclusions you've drawn might end up finding lessons and principles in models that are too complex—if not chaotic—to bear them, I like much of the pragmatic advice you gave. Elements like opportunity cost and brand continuity are always good things to reason from, even if there might not necessarily be a 'And THAT'S why MacDonald's doesn't sell pizza' Just-So bow on the top. As far as what I might offer as an alternative to the specific Macdonalds pizza lesson we're discussing here, I might say that what it really comes down to is knowing WHAT you're doing, and WHY. I really do think that being prudent and judicious with the directions you take your business is very important, just as I think it's very important to continually innovate and reevaluate the market, its technologies, and its material resources. The key is that if you chase after new opportunities just because they're there, you're just as sunk as if you continually 'double down' (as they odiously say) on the same form you've already built just because it's worked in the past and it's what the subhead on your stationery says. Both of these tactics will be necessary. And maybe even still when you're young and agile. The most important thing is understanding what factors in your market will encourage one approach, and what factors will encourage the other, and to be able to explain to your team and your customers (and yourself) why a certain course is best. Mindfulness and all that. I think a lot of the industrial companies of the 19th and 20th centuries are interesting in this regard. You could take someone who made a fortune on rubber boots for 40 years. If you ask his customers what his brand stands for, they'll say it's boots. Thus making a whole new product, like tank treads, looks like trying to install a pizza oven in a burger joint. But if the Great War comes, you're gonna have a very new and very big market in rubber treads. And it turns out that a boot company making tires is more like a burger joint selling coffee: the products use a lot of the same techniques to produce and sell and it turns out that your core competency isn't boots at all, but rubber manufacturing. Of course as noted , the ability to see the commonalities between burgers and coffee or boots and tank treads is maybe irreducible.
  - deleted 16y ago
    [deleted]
  - karjaluoto 16y ago
    You're right: companies can add new products/services to their offerings, so long as the additions work within the values and vision of the brand. So, coffee works, because it fits with the morning menu. (My guess is that onion rings would probably work too.) The same logic might have seemed quite sound when they introduced pizza at McDonalds, as pizz is seen by many as a fast food. The trick here, was that pizza and burgers actually seem to live in quite different "families." It's good that McDonalds tries different things, and as you've noted, they have one of the best testing environments for doing so. The cost and scale of this blunder makes it a useful example to consider, though.
- GFischer 16y ago
  McDonald's still offers home delivery overseas (at least here in Montevideo, Uruguay, and I believe the same is true of Argentina).
  - inerte 16y ago
    And in Brazil. You can order from Mcdonald's for almost every part of São Paulo.
singer 16y ago
This is an interesting article. However, most of it has nothing to do with pizza or McDonald's.
stcredzero 16y ago
Number two just seems foolish; boring marketing is about as sensible as ordering flavorless food. It makes sense for pregnant women. The substances with a distinct taste and smell often arose as plant defenses, which aren't necessarily good for developing babies. Don't know if that does anything for the analogy, though.
dennisgorelik 16y ago
The advise to "stick with one thing" goes against the advise of "iterate until you hit a market fit". Still it's a good set of marketing stories.
- ebiester 16y ago
  I don't think so. The advice is, don't try to be everything. Iterating until finding market fit isn't about trying to be everything; it's about finding that one thing.
dagw 16y ago
I remember the McDonald's pizzas and seem to recall them being the best thing they served. I was really sad to see them go. Sure they couldn't compete with the best pizza places, but they could compete with everything else McDonald's and their competitors sold.
- ergo98 16y ago
  Second that. I loved their pizzas, and was disappointed when they disappeared.
wushupork 16y ago
McDonalds has many different offerings overseas. In fact McDs does have fried chicken in Thailand and I recall my days in Malaysia that they had a McRendang (rendang is a curry) as well as a teriyaki sauced based burger. They also had blueberry pie filling which I thought was way better than apple. My point here is that they also adapt to different markets. KFC in Malaysia had a spicy chicken which was actually spicy. It's not limited to just McDonalds, but lots of franchises have to adapt and test out what's going to work with their environment.
btilly 16y ago
They didn’t accept that their pizza simply wasn’t as good as that of established pizzerias. I actually remember this incident. In blind taste tests, McDonalds pizza was judged as BETTER than competitors like Dominos. It certainly was not worse. However if you repeated the taste test and told people where the pizza was from, McDonalds lost. It turns out that branding strongly affects our perceptions of taste. Which underscores the challenges of trying to swim upstream against your brand identity.
- karjaluoto 16y ago
  I agree with you: branding does affect our perceptions of taste. As for the statement, "their pizza simply wasn’t as good as that of established pizzerias" I should note that Domino's wasn't the company I had in mind. I was referencing the little pizzerias where the pizza is almost always better than the fast food equivalent. Heck, even Domino's admits that theirs isn't so great: http://www.youtube.com/watch?v=AH5R56jILag http://www.youtube.com/watch?v=AH5R56jILag
  - dagw 16y ago
    "their pizza simply wasn’t as good as that of established pizzerias" Really, the same could be said about their burgers. In just about any city you care to mention, you'll find small independent places serving far superior burgers to what McDonalds offers, and that doesn't seem to have harmed them in the slightest. I'm sure there are plenty of good reasons they got rid of the pizzas, but I have a hard time believing it was because they weren't good, since I distinctly recall them being at least much better than their burgers.
    - karjaluoto 16y ago
      If you re-read the passage, you might note that quality was only one of the points raised. (And, in my opinion, not the key point of the argument.)
- GFischer 16y ago
  Hmm... the fact of the branding making it less desirable is interesting... do you know that in some parts of the Third World (Uruguay for example), McDonalds is pretty upscale? (at least in the sense that it is expensive and considered "dining out" for an important swath of the population)
edw519 16y ago
I worked for McDonald's for years and went through many of their "experiments". It took us workers about 12 minutes to figure out how well something would work out. We often wondered who thought up this stuff up and why didn't they ask us first. Some of the losers: - A hard ice cream cone that was supposed to "soften" while the customer ate their food. But no matter how much we pushed them, no one ordered them with their meal. They came back for them, but they were too hard to bite into, so people just stopped buying them. - Hamburgers with tomatoes. There just wasn't an easy enough way to handle tomatoes at the volumes McDonald's does. - Grilled cheese. No one wanted them. - Plastic trays. They were supposed to reduce paper costs. But people just left them on their tables, so we had to hire an additional dining room cleaner, offsetting any savings. (Once they changed the garbage cans to have tray receptacles on top, people got the hint and started using them again.) On the other hand, there were some real winners: - The Egg McMuffin. duh. All that store capacity had been wasted on coffee and donuts. - The Quarter Pounder. Hard to believe McDonald's was so successful with those tiny burgers for so many years before. - And of course, the Big Mac, which was invented by my boss's boss in order to compete with Eat N Park's Big Boy: http://www.pittsburghlive.com/x/pittsburghtrib/s_383369.html http://www.pittsburghlive.com/x/pittsburghtrib/s_383369.html (The most amazing fact was that he lived to be an old man even though he ate at McDonald's every day.)
- bokonist 16y ago
  Hamburgers with tomatoes. There just wasn't an easy enough way to handle tomatoes at the volumes McDonald's does. Interesting. My primary reason for always eating at Wendy's over McDonalds is the tomatoes (well that, and Wendy's has a much better meat to bun ratio). I wonder why Wendy's can handle the tomatoes, but not McDonald's? Is the volume a problem at the individual store level, or at the corporate, bulk purchasing and distribution level?
  - GFischer 16y ago
    Once again, McDonald's burgers overseas are different and do include tomatoes (not the BigMac, but other burgers like "McNifica" which is only sold in Mexico and Latin America according to Wikipedia - http://en.wikipedia.org/wiki/McDonald%27s_products http://en.wikipedia.org/wiki/McDonald%27s_products )
decadentcactus 16y ago
Aside from the Maccas bit, the article was pretty interesting, although this as well as others seem to only focus on successful "be different" companies. Or maybe it's the pessimist in me that thinks if I tried it, it'd fail miserably.

19 points by karjaluoto 16y ago

I worked at McDonalds as a teenager and in college. Our store owner seemed to be enjoy being a test-bed for new products or concepts that actually made it out of the labs. Some things our store did while I was there: * Fried Chicken. Yup, McDonalds fried chicken. We installed this huge vat in the back of the store and boxed up greasy fried chicken. And it sold pretty well. * Home delivery. I'm not kidding, we actually implemented a home delivery concept where the customer would call in an order to some call center, and out popped an order on a special printer in the store. Someone would box up the order, and drive it over to the customers house. It was a pain in the butt from a resource scheduling perspective, but a wonderful thing for the hamburger-flippers (tips, and 15 minutes away from the store in the car)

tptacek 16y ago
When you look at it through the lens of McDonalds having tens of thousands of testbeds to expiriment with, the conclusion you draw might be exactly the opposite of the one the article makes. It's not that McDonalds should stick to its knitting. It's that they have billions of dollars and one of the 5 best retail infrastructures in the world to develop and test concepts with. Of course they're going to try lots of things that don't work out. That doesn't mean "stick with the burgers"; it means, "stick with the things that are scalable and compatible with McDonalds". Pizza happens not to be one of them. Coffee, on the other hand? Appears to have made it out of the testbed.
- crux 16y ago
  I agree. Marketing anecdotes are always fun to read, but it seems like nearly every marketing expert that comes through these pages is suffering from a serious case of post hoc, ergo propter hoc with a side effect of confirmation bias. The nature of business competition is such that this author, or Malcom Gladwell, or whoever happens to be trying to find a thread of causality that they can build a strategy out of, is nearly always going to be able to find a dozen examples that bear out a given strategy, and a dozen that clearly argue for its opposite. But 'differentiate yourself early with a product that fits the needs of the market and low overhead, grow steadily, and once you become big enough to sustain multiple operations, devote some resources to experimentation in order to keep your brand vital without diluting your core message; also, make friends with governmental agencies' doesn't roll off the tongue, and doesn't seem to the be cutting insight we're looking for. The only one-sentence business strategy I've heard of seems to be 'Work hard, even if you don't see any immediate payoff, and get a little lucky.' Of course then again the fact is that most business authors are not as good as the people actually working at MacDonalds and their ilk. The author sees the way things are and can only conclude it's because they're following a natural and immutable law: MacDonald's pizza failed because it didn't conform to their natural state. But as you point out, Coffee (and biscuits) are just as unnatural if you assume that your 'one thing' is what you are right now, which is a burger stand. The reason that nearly all businesses succeed is because they have been shrewd—or lucky—enough to decide on their own form. Paring down to your core competency—which is tacitly assumed to be the thing you're best at RIGHT NOW—is sometimes a part of this process, as is experimenting with new shapes, as is finding previously-undetected connections between the two.
  - karjaluoto 16y ago
    I'd love for you to read the rest of the book (several chapters are already online for free). I'd be interested in seeing how you feel about it after doing so. We've worked with a number of small organizations in helping them find their stories and tell them. Largely, what we've come back to is similar to what you're stating here: there are very few immutable rules. You just have to figure out what you're doing, try things out, and make the best choices you can. The challenge for the marketer (or writer in this case) is to try to find patterns and distill meaning from them. The truth is, marketing--and business success--is hard to pin down, or repeat. Nevertheless, owners of small companies often seem to think (erroneously) that the big guys have it all worked out, and that it's easy for them. What I worked to do with this book, was outline a set of good, solid suggestions, peppered with anecdotes relating to those who seem to have been successful, as well as those efforts that haven't. It's imperfect, but I believe there are useful suggestions in there; it's up to the reader to determine what might work for them. For the record, I like the strategy: "Work hard, even if you don't see any immediate payoff, and get a little lucky." The tough part is that there are a number of other questions that such a suggestion won't help answer. At those times, we have to dig deeper and get into the more gray areas. It's harder to make clear and irrefutable statements about those, but no less important to try to find some plausible arguments.
  - crux 16y ago
    karjaluoto: I will happily read the rest of the chapters you've got up there, as I quite like your writing style. Though, as I said above, I do think that some of the overall conclusions you've drawn might end up finding lessons and principles in models that are too complex—if not chaotic—to bear them, I like much of the pragmatic advice you gave. Elements like opportunity cost and brand continuity are always good things to reason from, even if there might not necessarily be a 'And THAT'S why MacDonald's doesn't sell pizza' Just-So bow on the top. As far as what I might offer as an alternative to the specific Macdonalds pizza lesson we're discussing here, I might say that what it really comes down to is knowing WHAT you're doing, and WHY. I really do think that being prudent and judicious with the directions you take your business is very important, just as I think it's very important to continually innovate and reevaluate the market, its technologies, and its material resources. The key is that if you chase after new opportunities just because they're there, you're just as sunk as if you continually 'double down' (as they odiously say) on the same form you've already built just because it's worked in the past and it's what the subhead on your stationery says. Both of these tactics will be necessary. And maybe even still when you're young and agile. The most important thing is understanding what factors in your market will encourage one approach, and what factors will encourage the other, and to be able to explain to your team and your customers (and yourself) why a certain course is best. Mindfulness and all that. I think a lot of the industrial companies of the 19th and 20th centuries are interesting in this regard. You could take someone who made a fortune on rubber boots for 40 years. If you ask his customers what his brand stands for, they'll say it's boots. Thus making a whole new product, like tank treads, looks like trying to install a pizza oven in a burger joint. But if the Great War comes, you're gonna have a very new and very big market in rubber treads. And it turns out that a boot company making tires is more like a burger joint selling coffee: the products use a lot of the same techniques to produce and sell and it turns out that your core competency isn't boots at all, but rubber manufacturing. Of course as noted , the ability to see the commonalities between burgers and coffee or boots and tank treads is maybe irreducible.
- deleted 16y ago
  [deleted]
- karjaluoto 16y ago
  You're right: companies can add new products/services to their offerings, so long as the additions work within the values and vision of the brand. So, coffee works, because it fits with the morning menu. (My guess is that onion rings would probably work too.) The same logic might have seemed quite sound when they introduced pizza at McDonalds, as pizz is seen by many as a fast food. The trick here, was that pizza and burgers actually seem to live in quite different "families." It's good that McDonalds tries different things, and as you've noted, they have one of the best testing environments for doing so. The cost and scale of this blunder makes it a useful example to consider, though.
GFischer 16y ago
McDonald's still offers home delivery overseas (at least here in Montevideo, Uruguay, and I believe the same is true of Argentina).
- inerte 16y ago
  And in Brazil. You can order from Mcdonald's for almost every part of São Paulo.

singer 16y ago

This is an interesting article. However, most of it has nothing to do with pizza or McDonald's.

stcredzero 16y ago

Number two just seems foolish; boring marketing is about as sensible as ordering flavorless food. It makes sense for pregnant women. The substances with a distinct taste and smell often arose as plant defenses, which aren't necessarily good for developing babies. Don't know if that does anything for the analogy, though.

dennisgorelik 16y ago

The advise to "stick with one thing" goes against the advise of "iterate until you hit a market fit". Still it's a good set of marketing stories.

ebiester 16y ago
I don't think so. The advice is, don't try to be everything. Iterating until finding market fit isn't about trying to be everything; it's about finding that one thing.

dagw 16y ago

I remember the McDonald's pizzas and seem to recall them being the best thing they served. I was really sad to see them go. Sure they couldn't compete with the best pizza places, but they could compete with everything else McDonald's and their competitors sold.

ergo98 16y ago
Second that. I loved their pizzas, and was disappointed when they disappeared.

wushupork 16y ago

McDonalds has many different offerings overseas. In fact McDs does have fried chicken in Thailand and I recall my days in Malaysia that they had a McRendang (rendang is a curry) as well as a teriyaki sauced based burger. They also had blueberry pie filling which I thought was way better than apple. My point here is that they also adapt to different markets. KFC in Malaysia had a spicy chicken which was actually spicy. It's not limited to just McDonalds, but lots of franchises have to adapt and test out what's going to work with their environment.

btilly 16y ago

They didn’t accept that their pizza simply wasn’t as good as that of established pizzerias. I actually remember this incident. In blind taste tests, McDonalds pizza was judged as BETTER than competitors like Dominos. It certainly was not worse. However if you repeated the taste test and told people where the pizza was from, McDonalds lost. It turns out that branding strongly affects our perceptions of taste. Which underscores the challenges of trying to swim upstream against your brand identity.

karjaluoto 16y ago
I agree with you: branding does affect our perceptions of taste. As for the statement, "their pizza simply wasn’t as good as that of established pizzerias" I should note that Domino's wasn't the company I had in mind. I was referencing the little pizzerias where the pizza is almost always better than the fast food equivalent. Heck, even Domino's admits that theirs isn't so great: http://www.youtube.com/watch?v=AH5R56jILag http://www.youtube.com/watch?v=AH5R56jILag
- dagw 16y ago
  "their pizza simply wasn’t as good as that of established pizzerias" Really, the same could be said about their burgers. In just about any city you care to mention, you'll find small independent places serving far superior burgers to what McDonalds offers, and that doesn't seem to have harmed them in the slightest. I'm sure there are plenty of good reasons they got rid of the pizzas, but I have a hard time believing it was because they weren't good, since I distinctly recall them being at least much better than their burgers.
  - karjaluoto 16y ago
    If you re-read the passage, you might note that quality was only one of the points raised. (And, in my opinion, not the key point of the argument.)
GFischer 16y ago
Hmm... the fact of the branding making it less desirable is interesting... do you know that in some parts of the Third World (Uruguay for example), McDonalds is pretty upscale? (at least in the sense that it is expensive and considered "dining out" for an important swath of the population)

edw519 16y ago

I worked for McDonald's for years and went through many of their "experiments". It took us workers about 12 minutes to figure out how well something would work out. We often wondered who thought up this stuff up and why didn't they ask us first. Some of the losers: - A hard ice cream cone that was supposed to "soften" while the customer ate their food. But no matter how much we pushed them, no one ordered them with their meal. They came back for them, but they were too hard to bite into, so people just stopped buying them. - Hamburgers with tomatoes. There just wasn't an easy enough way to handle tomatoes at the volumes McDonald's does. - Grilled cheese. No one wanted them. - Plastic trays. They were supposed to reduce paper costs. But people just left them on their tables, so we had to hire an additional dining room cleaner, offsetting any savings. (Once they changed the garbage cans to have tray receptacles on top, people got the hint and started using them again.) On the other hand, there were some real winners: - The Egg McMuffin. duh. All that store capacity had been wasted on coffee and donuts. - The Quarter Pounder. Hard to believe McDonald's was so successful with those tiny burgers for so many years before. - And of course, the Big Mac, which was invented by my boss's boss in order to compete with Eat N Park's Big Boy: http://www.pittsburghlive.com/x/pittsburghtrib/s_383369.html http://www.pittsburghlive.com/x/pittsburghtrib/s_383369.html (The most amazing fact was that he lived to be an old man even though he ate at McDonald's every day.)

bokonist 16y ago
Hamburgers with tomatoes. There just wasn't an easy enough way to handle tomatoes at the volumes McDonald's does. Interesting. My primary reason for always eating at Wendy's over McDonalds is the tomatoes (well that, and Wendy's has a much better meat to bun ratio). I wonder why Wendy's can handle the tomatoes, but not McDonald's? Is the volume a problem at the individual store level, or at the corporate, bulk purchasing and distribution level?
- GFischer 16y ago
  Once again, McDonald's burgers overseas are different and do include tomatoes (not the BigMac, but other burgers like "McNifica" which is only sold in Mexico and Latin America according to Wikipedia - http://en.wikipedia.org/wiki/McDonald%27s_products http://en.wikipedia.org/wiki/McDonald%27s_products )

decadentcactus 16y ago

Aside from the Maccas bit, the article was pretty interesting, although this as well as others seem to only focus on successful "be different" companies. Or maybe it's the pessimist in me that thinks if I tried it, it'd fail miserably.