Question

During an economic slump, such as the 2008 recession, what pricing strategies could a fast food chain such as mcdonalds use to maintain its sales? Use some of the concepts discussed in this chapter in your answer. (from chapter five )

Answer 1

During economic crises, consumers are likely to look for cheaper alternatives for meeting their daily needs. As such, consumers are more inclined towards low priced goods during financial crises. Fast food becomes even more attractive when consumers decide to cut spending.Fast food chains like McDonald's benefit immensely during such economic crises.

During the recession of 2008, same-store sales of McDonald's didn't decline at all (Source: economist.com - Good and hungry). McDonald's adopted a low pricing strategy to keep sales at a steady level which paid off really well during the recession. McDonald's is known as the low cost producer in the food industry. So, in times of recession, when cost becomes most important, entities like McDonald's find it easier to maintain sufficient sales. Thus, following a low pricing strategy enables McDonald's gain a competitive advantage.

McDonald's engages in bundle pricing that offers meals and other product bundles for prices that are discounted, compared to purchasing each item individually. This strategy enables McDonald's optimize cost and product value. McDonald's also engages in psychological pricing by pricing products in a way that they appear more affordable such as $2.99 . (Source: panmore.com McDonald's Marketing Mix Analysis ).

The two pricing strategies mentioned above enable McDonald's to survive during times like recession. Apart from offering reasonably low priced products, the two pricing strategies allow McDonald's to create an illusion of affordable pricing that makes consumers buy more of the products, thus enabling McDonald's push sales even further during an economic downturn.