Chartered Management Institute: Consumers want innovation

The CEO and president of McDonald's UK says businesses must invest and innovate if they want to keep their customers' trust.

by Jill McDonald
Last Updated: 06 Nov 2012

We're living in tough economic times and this is most visible on our high streets, with recent figures from the British Retail Consortium suggesting that more than 10% of town-centre shops are empty.

When the global recession took hold in 2008, businesses began to slash prices. However, it quickly became evident that this was only a short-term solution. The companies that have weathered the economic storm are those that have continued to invest in innovation and evolved or adapted their products or services, based on the changing needs of their customers.

While affordability has become more important, consumers are also interested in value for money, sustainability and, critically, the total experience they receive. In essence, consumers need to know they can trust the product and the company behind it. As people have less disposable income, the importance of trust increases with every purchase.

Take a look at the entertainment sector.

Over the past few years, many new plays and musicals in the West End have closed because of poor ticket sales, while old favourites such as Les Miserables and The Phantom of the Opera continue to sell out. When consumers are spending money, they want to trust that they are going to get a good experience.

Another example is Apple, which has invested heavily in innovation in recent years. The result of this has been a 'halo effect', where the purchase of one product often leads to the purchase of others. By understanding its customers, and by constantly evolving its products, Apple has become one of the more trusted global brands, at a time when consumer spending has been at an all-time low.

At McDonald's, we have been the first to admit that we lost sight of the importance of investment for part of the past decade. In 2005, after experiencing the worst year in our UK history, it was time to take a step back and reassess. The years that followed became a journey of rediscovery.

We spent a great deal of time talking and listening to our customers and, with the support of our franchisees, began investing extensively in the customer experience we offered.

We acknowledged the importance of building trust among our customers. In order to achieve this, we made many progressive moves, which included modernising our restaurant environment, introducing free Wi-Fi and adapting our menu. From carrot sticks to Rainforest Alliance-certified cappuccinos, we've made more changes to our menu in the past six years than we did in the previous 30. Listening to our customers and keeping our restaurants fresh and up-to-date have helped us in the face of growing competition in the fast food industry.

But innovation should never be restricted to one aspect of business operations. We also began investing heavily in our people. We were among the first employers to be granted awarding body status and we started offering our employees the opportunity to gain nationally recognised qualifications while they worked their way up a structured learning ladder. Today, they can gain qualifications ranging from BTECs to foundation degrees; we have a PC in every restaurant for staff; and we invest £30m a year in training and education - an investment that has given us people who are prouder, more dedicated and more enthusiastic about coming to work.

This focus on innovation and investment has been, and will continue to be, the biggest driving force behind our overall strategy. Consumers today trust our brand more than they used to. But we are not complacent and will continue to innovate. Take the last quarter: we were one of the first large-scale retailers to roll out contactless payment technology to all our restaurants in the UK, enabling our customers to make quick, convenient purchases in seconds.

So how do we keep a focus on innovation within a large business? We are a franchised organisation with more than 60% of our UK restaurants owned and operated by independent businessmen and women. While our franchisees are part of the wider McDonald's system, local managers also have the autonomy to make investment decisions. It has been their continued commitment to investment that has given a huge boost to our momentum.

As footfall on UK high streets continues to decline year on year, casualties are emerging.

Household names remain at risk.

At McDonald's, we've bucked the trend and seen a significant uplift in our sales compared with a year ago. We've learned from our past mistakes. We once lost sight of the need to evolve and invest and as a result we lost the trust of our customers. We will not do so again.

CV: Jill McDonald is CEO and president of McDonald's UK. Having graduated with a first-class degree in business studies, she went on to hold a number of senior marketing positions in Colgate-Palmolive, British Airways and McDonald's. In 2008, Jill was voted Marketer of the Year by the Marketing Society.

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