Introduction
There are very few people in the world who haven't heard of McDonald's. It is one of the largest fast-food chains worldwide. Running its franchise in almost 120 countries, it has over 37855 restaurants. The company was founded in California in 1940 by Richard and Maurice McDonald. Now it has a net worth of $163 billion. Therefore, it is the world's largest fast-food restaurant franchise. Their advertising tactics are why they can reach a humongous number of customers. It takes a great deal of planning and an extended budget to manage it. Let's get into it then, how are they managing the advertising costs?
Advertisement Cost Analysis
McDonald’s has always been one of those companies that takes full advantage of advertising facilities. They go all the way through to advertise their franchise and reach as peoplemany number as possible. They pursue all advertising methods, including newspapers, radio, billboards, pamphlets, TV commercials, social media advertising, brand ambassadors, posters, and more. Advertising year-round is, without a doubt, a bit of money profligacy.
According to McDonald's annual report, in 2019, McDonald's spent quite a bit on advertising. Well, why won't they! Their creative and effective advertising has greatly contributed to their success. Let's look at some data to better understand their advertising costs.
- In 2019, the franchise spent roughly $447.3 million on worldwide advertising.
- In this cost, they spent $365.8 million on contributions to advertising cooperatives and the rest on media commercial production.
- In the previous years, the advertising expenses wereÂ
2018-$476.8Million and
2017-$633.1Million.
- In the very years, their revenue stood to be:
in 2019- $21.08Billion,
in 2018- $21.03Billion and
In 2017, $22.83Billion.
From the data, we can see that the company has reduced its advertising costs every year. They collected the highest revenue in 2017, when they spent the most on advertising. Their revenue dropped by over $ 1.8 billion in 2018, when they decreased their advertising costs. So, it is safe to say they are cutting costs in their annual budget. But by 2019, they cut advertising costs further and collected more revenue (+0.05 Billion USD) than the previous year. So, they are trying to pursue a cost-effective advertising budget plan. It is working for them so far.
It may seem like a little imbalanced operating system, as they spend a huge amount of money on just advertising. But it is important to remember that McDonald's operates in 120 countries and competes with thousands of other fast-food restaurants. So, if they do not capture their customers' attention, they will not be in business for long. They did not create a company that became the largest fast-food chain without putting in place a strong, appealing approach. And high-budget advertising is the way they did it
Large advertising costs led them to full exposure in the domestic and international markets. It helped them create customer value and establish a dominant position in the food and restaurant market. Every kid smiles when they hear the name of McDonald's. It is an in-budget food for everyone. They reach over 69 million customers every day through effective yet creative advertising. So, their advertising cost is money well spent. 2020 has been tough so far. But in recent years, the fast-food market has become more intense. McDonald's has fought through it and held its position at the top of the chart. And they did all of it while providing amazing customer service and extensive yet substantial advertising.
Reference:
- https://corporate.mcdonalds.com/corpmcd/investors-relations/financial-information/annual-reports.htmlÂ
- https://revenuesandprofits.com/mcdonalds-net-worth-2019/#:~:text=Net%20Worth,estimated%20%2416%20to%20%2418%20billion.
- https://en.m.wikipedia.org/wiki/McDonald%27sÂ
- https://notesmatic.com/mcdonalds-advertising-expenses/
- https://www.ukessays.com/essays/marketing/mcdonalds-advertising-and-marketing.php