By: Mikey Renan
In an article I published last month for FSR magazine, I called out a significant drop in visit share for McDonald’s from late December ’17 to early January ’18. In fact, the dip marked two consecutive months of visit share declines for McDonald’s. It was both an interesting and unexpected trend, so I dug into over 100M Sense360-observed LSR visits in order to identify why the dip in visit share occurred as well as whether this drop in visit share is something for McDonald’s to worry about. Below is the beginning of my investigation.
Important clarifying note on the drop in LSR visit share
The visit share drop that I refer to in this analysis is a drop in visit share vs prior months. That is to say, McDonald’s visit share in December ’17 was lower than their share in November ’17, and their visit share in January ’18 was lower than their share in December ’17. Even with those two consecutive months of declining share, McDonald’s share year-over-year was still up in December and January vs. prior year. Below is a chart that illustrates McDonald’s positive visit share trend over the trailing year, and also highlights the declines in December and January that we will focus on.
Is this dip concerning?
From what I’ve initially observed, this dip in visit share is an expected, seasonal dip for McDonald’s. As you can see in the chart above, the last time McDonald’s experienced two months of consecutive declining visit share was in December and January of ’16/’17, which they followed up with visit share growth in 8 out of 10 months, in what was a resoundingly successful 2017.
If the downwards visit share trend continues into February and March this will be a very different start to the year and may begin to concern. McDonald’s first week of visit share in February is flat vs January, but it’s still too early to know what the rest of the month will bring. I’ll most definitely be keeping my eyes on this trend.
What leads to the dip in visit share in December and January?
I dug into three components to try and explain the dip McDonald’s saw over the past two months:
1) Market Shifts towards non-optimal Occasions for McDonald’s
McDonald’s performs particularly well with quick-duration visits among travelers as well as short duration breakfast visits (specifically among morning Commuters). These occasions make up ~20% of McDonald’s visits. However, these visit occasions were a much smaller part of the LSR visit ecosystem in December ’17 and January ’18 vs the rest of the trailing year. In December and January travelers opt for longer duration relaxed meals and breakfast commuters make up a smaller percentage of total traffic as well.
2) Market Shifts towards non-optimal Personas for McDonald’s
Sense360 tracks 10 behavioral-based persona segments. We can observe the behaviors of these persona segments across the majority of our 100M annual LSR visits. So I took a look at performance among these personas and saw a similar trend towards non-optimal segments for McDonald’s. Similar to the trend I saw in visitation occasions, I saw that McDonald’s top personas – “Busy on a Budget” and “Blue Collar Value Seekers” – which collectively make up over 40% of McDonald’s total visits, saw the two biggest declines in LSR visitation share in Dec/Jan vs. the rest of the year.
So during the months of December and January, some of McDonald’s top performing occasion segments AND persona segments dropped off quite a bit. It’s no surprise that McDonald’s struggled to maintain the visit share momentum in those months that they achieved throughout the rest of the year.
3) Performance Among Competitors
Panera, Chick-fil-A and Starbucks Coffee were three of the biggest gainers in visit share in Dec ’17-Jan ’18 vs Feb ’17 – Nov ’17. All 3 brands saw y-o-y increased visit share during those months as well. An improvement for those three brands does not by default suggest declining performance for McDonald’s, so I took a deeper look into this data and utilized Sense360’s Head-to-Head Brand Draw metric which is a better indicator of direct competition. Head-to-Head Brand Draw allows you to see what percentage of guest visits go to each of two brands when the two brands are within a specified distance of each other. For my analysis I was curious to look at Head-to-Head Brand Draw for McDonald’s vs those three brands. I specifically looked into performance during the breakfast day-part. And across the board, these three brands all performed better against McDonald’s in the last two months vs. November.
– When McDonald’s was within 1/2 of a mile of a Starbucks, guests were 3% more likely to go to the Starbucks for breakfast during Dec/Jan vs. the trailing 10 months.– Panera saw an 2% increase.– And Chick-fi-A saw a 1% increase.
So at least during McDonald’s key occasion of breakfast, guests were shifting their visitation to competitor brands over McDonald’s. Again, the questions is whether this trend continues into February and March or whether it was purely seasonal. Time will tell.
As with any investigation with behavioral data, one question begets another. You can investigate shifts in customer overlap for McDonald’s vs their competitors broken out by occasion, persona, region. You could dive into guest migration from McDonald’s to competitors, shifts in visitation frequency, shifts in attitudes and brand perceptions via survey data, and so much more. There are limitless ways to explore this question and limited characters for this post, but I for one am incredibly curious to explore whether McDonald’s phenomenal 2017 continues into 2018 or whether it slows a bit. Only time will tell for certain, but behavioral data makes it easier to understand and predict these trends.