Face Your Weaknesses

In the five years leading up to 2003, McDonald's saw its market capitalization fall by $12.2 billion. And this is no Internet stock.

    The problem was that despite the company's nearly 100 percent brand awareness in every global market, the old images of Ronald McDonald weren't wearing well. Just as troubling, evidence was mounting that junk food was fueling an obesity epidemic in the U.S. McDonald's had long struck a defensive pose against such barbs. But it was time to take control of the brand before outside forces did it for them.

    McDonald's discovered that while its big-budget Disney tie-ins and Olympics sponsorships kept the Golden Arches in kids' sights, mothers were its real problem. Opinion studies and focus groups showed a mounting distrust of McDonald's and guilt among suburban moms about letting kids eat there.

    "Everything we do is really driven through the eyes of our customers and understanding what their needs and desires are," says Global Chief Marketing Officer Mary Dillon.

    So the chain set out to appeal to moms. In the past three years, one-third of its 13,725 restaurants have been upgraded, and new premium-priced salads and chicken meals have been added. Fruit offerings such as apple slices have helped change Mickey D's image -- it's now the nation's biggest wholesale buyer of apples.

    This year, McDonald's global brand value rose a healthy 6 percent, and its market capitalization grew by $2 billion. The company took the mom-friendly message to a new level last February. McDonald's kicked off a global campaign tied in with the Olympics that talks up the importance of exercise and nutrition, using such athletic role models as tennis stars Venus and Serena Williams.

    The campaign ("It's what I eat and what I do...I'm lovin' it") includes TV ads, new packaging, and a series of Ronald McDonald videos teaching children how to eat well and stay active. Meanwhile, average restaurant sales are up to a record $1.9 million thanks to the premium-priced items.

Says Dillon: "One of the fun things about McDonald's is we are always learning about how we can expand our brand."