Analysis: Will McDonald's loyalty app work with SEA consumers fatigued with loyalty programmes?

McDonald’s power to pull in consumers through its marketing activities has proven unshakable despite competition in the fast-food space heating up. Its most recent global partnership with Korean superstar band BTS has resulted in snaking queues across Asia and customers reselling the products online at obscene prices.

With orders going off the hook, the brand has now announced that it will launch its loyalty programme starting with the US.

MARKETING-INTERACTIVE understands that the programme is slated to roll out in Asia sometime next year.

According to a release by the brand, “For over 65 years, McDonald’s fans’ longtime loyalty has been unmatched.” As such, the brand now wants to reward its fans with the MyMcDonald’s Rewards to unlock freebies by enjoying their favorite menu items. The move is part of McDonald’s “digital experience growth engine” through which the fast-food giant hopes to provide a seamless McDonald's experience.

While in the US, the brand has already been trialling its loyalty program first in its McCafe outlets, and then in selected mainline stores, in Asia, particularly in Singapore and Malaysia, it has been pushing the idea through its VIP drive-through decal.

In a conversation with MARKETING-INTERACTIVE Kevin Kan CEO of Break Out Consulting Asia said that the launch of the app in Asia will certainly give the brand first-mover advantage. But the value for McDonald’s isn’t just customer loyalty, but the massive database that they will acquire with this campaign to launch the loyalty program.

“Unlike for an airline frequent flier program, food is a necessity and low cost. This provides the brand with an opportunity to acquire more loyal members than a regular airline loyalty program. Imagine the partnerships McDonald's could tie up with given the size of the database. Cross-promotion opportunities will have massive appeal to both McDonalds and their potential partners with the ability to push advertisements and even educational content through the digital loyalty app,” he said.

Keeping consumers hooked in a new world

With many markets in Asia still operating under restricted movement controls, having a loyalty programme can also allow the brand to add on another channel of direct communications with its consumers. Personalised promotions or meal combos through customer spend history can be created which will not only help marketing but also product design, said Kan.

Kan added that leveraging existing McDonald’s assets provides the brand with a low cost opportunity to maintain stickiness with customers.

Currently, the US loyalty program launch requires 6,000 points to redeem a Big Mac (where US$1 earns 100 points). “If the average spend for a family at McDonald's is US$26, then it only takes two and a half visits to get a free burger. All McDonald’s needs to do is leverage on its menu,” he said, adding that the brand simply has to keep its menu fresh which it has a proven track record of with initiatives such as the BTS promotion, chocolate pies, Spicy Chicken Nuggets and many others.

“Being brave to fail fast and try new ways to get customers coming back is important,” he said. The Southeast Asia market is a cluttered one with many substitutable fast food options and a plethora of hawker centres with multicultural cuisine. In this environment, McDonald’s can position itself as a fast-food connoisseur. Most vital will be to hook in the younger segment – the Happy Meal segment – to keep them coming back for more, he added.

Nishant Kaushal, head of data, strategy and solutions at ADNA said the world started to get into phases of lockdowns, most of the Quick Service Restaurants (QSRs) witnessed major shift in their volumes from on-premise to off-premise. As orders went digital, the major players also saw their business volumes going-up. New or less often users, freed-up from location-linked considerations, ordering digitally contributed to this growth as seen by McDonald’s which recently announced its Q1 2021 global sales to be 7.5% higher than pre-pandemic 2019 levels.

As outdoor-linked restrictions start easing, Kaushal added that a key challenge for QSRs will be to retain this wider customer base for a longer term.

“That’s the aim of McD’s newly launched loyalty program. But they are not the only QSR doing this. Big question is - can they do it better? McD’s had tried its hand on loyalty program on an app with its not-so-successful 2013 McD’s app in US which was mostly a coupon-on-phone. This new personalised approach will indeed be much better towards triggering repeat purchases,” he added.

Consumers are now offered many loyalty programs from all industries which might just lead to fatigue, but according to Teo Hon Wui co-founder of Mashwire:

There are many factors which consumers look out for such as exclusivity, personalisation, and promotions to name a few when deciding on which programme to embark on.

“Building a trusted relationship with consumers is especially important in the fast-food category as consumer decision can switch at the last minute, which allows the brand to sway them at the right moment,” he said.

Teo added that with the programme, McDonald’s now no longer speaks effectively to consumers only during meal or pre meal times, but expands its communication and engagement opportunities throughout the day. This allows the brand to "mentally prepare" a consumer to choose its brand, over competitors.  “With the growth in digital and online ordering in SEA, the launch of the loyalty programme signifies to their consumers that the brand hears them, and wants to be with them. And in today's context, when a brand is able to understand your needs and provide the right customised solution to you, you know that this is a brand that you can fall back on,” he said.

Possible pitfalls in enticing SEA consumers

Lynette Lee, business development director at XGATE added that with the cost of meals being somewhat low in Southeast Asia markets, earning points through purchase to get a free meal may not be that great an incentive, in the long run. Given, the consumers in this region are spoiled for choice when it comes to brands offering loyalty programs. Much more innovative and unique offerings will need to be introduced here to entice adoption.

“There is already an existing loyalty programme adopted by local markets here and hence it will seem like an extension of the loyalty strategy more than something new. As a personal user of the app in SG, I feel that more should be done to enhance the existing customer experience,” said Lee.

Jeff Ng, co-founder of Mashwire also added that while increasing the customers’ lifetime value is crucial, the direct relationship and engagement built via the programmes are also instrumental to brand advocacy, recruiting new or rejuvenating lapsed users.  However, the increased sensitivity revolving around data collection needs to be properly tackled to excavate the full potential of the program, he added.

“The program also aids consumers to consider beyond taste, which can be a choice based on the consumers’ emotional state, differentiating Macdonald’s from its competitor with another functional objective on top of convenience, through getting the most value out of their purchase,” he said.

Beating the fatigue

Freda Kwok, head, strategy and social media at GERMS Digital added there is user fatigue in having to keep track of multiple programmes and storing a growing list of brand apps. As such, a standalone loyalty programme needs to have clear and distinctive benefits over aggregated platforms that offer greater convenience. She said:

McDonald's can also consider exclusivity as an increasingly valued social currency.

"Especially with its strategy in Asia with limited edition menu items and strong record of successful brand collaborations, giving early or exclusive access to loyal members may bolster the take up," she added. 

 With access to refined customer data, McDonald's can also embark on more targeted incentives by catering to the specific needs of their customer profile, thereby improving onboarding and conversion rates. The data can also allow McDonald's to grow with their customers over changing life stages.

“By keeping track of changing preferences and evolving needs, McDonald's can continue to remain relevant to their customers and further unlock the potentials along the customer life cycle,"