Question: New Product Introductions @ McDonald's

New product ideas are a staple of our culture. Just take a look around you-how many billboards or television commercials can you count advertising new products or services? So, where do those ideas come from? If you're a company like McDonald's, the ideas don't come out of thin air. Instead, they're the result of careful monitoring of consumer preferences, trends, and tastes. McDonald's menu is a good example of how consumer preferences have affected change in food offerings. What used to be a fairly limited lunch and dinner menu consisting of burgers, shakes, and fries has now become incredibly diverse. The Big Mac came along in 1968, and Happy Meals were introduced in 1979. Breakfast now accounts for nearly 30% of business in the United States, and chicken offerings comprise 30% of menu choices. Healthy offerings such as apple dippers, milk jugs, and fruit and yogurt parfaits are huge sellers. The company now rolls out at least three new products a year.

Wade Thomas, VP U.S. Menu Management, leads the team behind most of today's menu options. He meets regularly with Chef Dan, the company's executive chef, to give the chef's team some idea anchor points to play with. When the chef's team is through playing with the concept, Wade's Menu Management team holds what they call a "rally." At a rally, numerous food concepts developed by Chef Dan's team are presented, tasted, discussed, and voted on. The winners move on to focus group testing. The focus groups are a huge source of external data, which help the Menu Management team with its decision on whether to introduce a product. If a product scores 8 out of 10 on a variety of rankings, the idea moves forward. The real test begins in the field. Wade and his team need to determine if the new product idea can be executed consistently in the restaurants. Data collected from the company's partnership with its owner/operators and suppliers are key.

If a product takes five seconds too long to make or if the equipment doesn't fit into existing kitchen configurations, its chances of implementation are low, even though consumer focus groups indicated a high probability of success. Throughout the idea development process, various statistical methods are used to analyze the data collected. The data are handed over to the company's U.S. Consumer and Business Insights team for conversion into meaningful information the menu management team can use. At each step along the way, the statistical analyses are used to decide whether to move to the next step. The introduction of the new Asian chicken salad is a good example of a new product offering that made it all the way to market. Analysis was performed on data collected in focus groups and eventually revealed that the Asian salad met all the statistical hurdles for the salad to move forward. Data collection and statistical analysis don't stop when the new products hit the market. Wade Thomas's team and the McDonald's U.S. Consumer and Business Insights group continue to forecast and monitor sales, the ingredient supply chain, customer preferences, competitive reactions, and more. As for the new Asian salad, time will tell just how successful it will become. But you can be sure statistical techniques such as multiple regression will be used to analyze it!

Discussion Questions:

1. During the past year, McDonald's introduced a new dessert product into its European market area. This product had already passed all the internal hurdles described in this case, including the focus group analysis and the operations analysis. The next step was to see how well the product would be received in the marketplace. The hurdle rate that has been set for this product is a mean equal to 160 orders per 1,000 transactions. If the mean exceeds 160, the product will be introduced on a permanent basis. A random sample of 142 stores throughout Europe was selected. Store managers tracked the number of dessert orders per 1,000 transactions during a two-week trial period. These sample data are in the data file called McDonald's New Product Introduction. Using a significance level equal to 0.05, conduct the appropriate hypothesis test. Be sure to state the null and alternative hypotheses and show the results of the test. Write a short report that summarizes the hypothesis test and indicate what conclusion Wade Thomas and his group should reach about this new dessert product.

2. Referring to question 1, suppose a second hurdle is to be used in this case in determining whether the new dessert product should be introduced. This hurdle involves the proportion of every 1,000 transactions that the number of dessert orders exceeds 200. Wade Thomas has indicated that this proportion must exceed 0.15. Based on the sample data, using a significance level equal to 0.05, what conclusion should be reached? Write a short report that specifies the null and alternative hypotheses and shows the test results. Indicate what conclusion should be reached based on this hypothesis test.