Unpacking a World Class Rewards Activation

With much anticipation and fanfare McDonalds launched their first global loyalty program this summer! In their recent Q3 2021 Earnings announcement, after only 4 months in market for the U.S. there are 15M active loyalty members (and growing).

Surely a global brand and digital powerhouse like McDonalds has everything figured out, right? What appears to be a simple points-based, earn & burn loyalty program, is actually a well-crafted digital experience platform that will enable McDonalds to continue to evolve and reach new heights.

• Creates incentive and purpose for customers to use their mobile device
• Drives frequency and return trips through clever use of Daily Deals and Bonus offers
• Stitches together a seamless experience both on-premises and through the drive thru
• Rewards store associates for their loyalty, which retains their best talent

Individually these key takeaways are fairly standard in the industry; however, what is more impressive is McDonald's ability to activate behind their 38,000+ stores literally overnight and create a digital platform that continues to improve and get better over time.

Where they got things right

Shifting media investments to mobile

Historically McDonalds has made huge media investments in conjunction with the summer Olympics. Tokyo 2020/2021 marked the first summer in 45 years where McDonalds was not a top sponsor, spending ~ $1B in advertising globally on this single brand activation. They made the decision to end their relationship early in 2017, and publicly stated it was based on their desire to focus on different priorities.

Instead, McDonalds has re-directed their marketing investments to growing their connection with Millenial and GenZ audiences through their Famous Orders collaborations. What seemed like a short-lived and off-brand gimmick, was actually a very well calculated use of marketing funds that resulted in more than 25% incremental app downloads for less than $100M in media spend.  This was a fraction of what they would have spent with the Olympics, and applied in much more targeted, measurable and ROI accretive way.

In a recent article by Sensor Tower:

Driving downloads of their mobile app in Spring and early Summer was setting the stage for the rewards program launch later in July.

Identity management and multi-factor authentication

The classic challenge for every loyalty program is identifying the loyalty member, providing a secure level of identity management (swipe card, phone number, etc.) then relaying that information quickly and seamlessly to the store associate behind the POS. A brand as big as McDonalds is a prime target for consumer data breaches, so balancing the need for speed & convenience along with consumer confidence & security was paramount for this activation.

Leveraging the embedded location services of the consumer's mobile device, along with a simple 4 digit code at the point of transaction is one of the more ingenious aspects of the program activation. By providing the end user with a convenient and hassle-free experience, McDonalds is both saving time at the register and reducing many aspects of friction that plague most loyalty-based points of interaction. Oh and by the way, now that consumers are conditioned to allow McDonalds to have access to their location, the brand can  harness even more information about the customer's whereabouts; collecting timely information about their behavioral need states, and sending targeted offers.

Team member benefits and training

Times are tough when it comes to labor, and McDonalds is using their rewards program as a means of creating competitive advantage. While there is always a bit of a training curve and barrier for service success when training new store associates, the technology deployed into the hands of the consumer is significantly simplifying what is needed from the McDonald's associate. They have largely removed the core human functions of tendering out the transaction, suggestive selling and order verification – and moved it to the mobile app and kiosk. This leaves time and space for store associates to truly service the guest, and create a warm and friendly experience (like their key competitors).

Not only are they making the job easier – finally, through the McDonald's Rewards program, they can finally honor an associate product discount nationwide. One store associate I spoke to mentioned that it has been a game changer for their family -- the McDonald's near their home was not part of the same owner/operator network, so they previously would not be granted their discounts. With the rewards program, their associate benefits are simply administered through the mobile app and are transferable to any McDonald's around the country. 

Strategic use of location services

Consumers have become increasingly sensitive to technology tracking their behaviors and whereabouts. Without question McDonald's mobile app is critically dependent on the consumer enabling location services, and accepting the terms through the program T&Cs; they are extremely up front about functionality that may not work and they provide very clear messaging to the user as to why location services is important.

The mobile app will automatically select your nearest location, and does not make the user fumble through a complicated search interface. Making that selection automatically on behalf of the user may seem presumptuous, but for most QSRs the most important first step in the ordering process is determining the best menu to present to the customer based on what is currently available at that restaurant's location. By systematically selecting the nearest location, the McDonald's app is pre-processing that information and removes a great deal of friction in the ordering process. Before you challenge the notion that the McDonald's menu is variable from location to location, consider the impact of supply chain shortages and the well documented soft serve ice cream outages.

In contrast even with location services disabled, competitor's mobile apps will still allow you to traverse through the full ordering experience, adding a number extra steps along the way (and adding friction). While I am sure the non-location services based approach was implemented based on copious amounts of user research and testing, it should not be absurd to expect the user to share their location in order to deliver a richer and more convenient experience. Consider if a ride-share app allowed a rider to summon a driver without knowing confidently the rider's precise location? In the race for convenience, precise location visibility is a basic necessity.

Payment method integration everywhere

The concept of creating a mobile payment wallet, or integrating electronic forms of payment through the mobile app (such as VenMo, Apple Pay, Android Pay) is certainly not new or innovative. McDonald's has done something a bit different and game-changing through their mobile app – as a Rewards member I can use my stored payment method for every service method, not just digital orders. While interacting with the in-store kiosk, drive thru attendant or even counter, I can simply ask them to use the payment method on file. As discussed before, the associate can positively confirm my identity using my precise location from my mobile device, along with the 4 digit MFA code, and I am seamlessly on my way. The associate does not need to handle any payment, and even the point of sale is relieved of the burden of interacting with a peripheral payment device.

We don't need to mention how much more efficiently the store can function with fewer needs for cash accountability checks, and loss prevention considerations.

Much like Disney's approach by allowing seamless payments through their Magic Band experience, McDonald's has seamlessly stitched together a payment experience that is extensible across channels and created a secure convenient way for customers to quickly pay for their orders and break through the convenience barrier.

Make no mistake, while the digital experience at McDonald's has introduced some new and innovative experiences that create value for the consumer at every turn, there are still opportunities for improvement (in our humble opinion). In a subsequent article, we will propose some ways in which the McDonald's Rewards program can continue to evolve and iterate to become even better. Stay tuned.