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Topics: Business, McDonald's, Hotel Pages: 5 (1636 words) Published: August 28, 2014
Brand Extension
McDonalds is faced with a serious issue in the fact that the McDonald brand is closely tied to a product class which limit it’s potential to extend . The extension of the brand must be credible to the consumers and have ties to the parent brand. It is therefore important that a new product set forth by McDonald is perceived by the consumers in much the same way as the McDonald restaurants are perceived.

The difficulty arises from the nature of the extension which is a category extension and not a line extension where McDonalds have a large amount of expertise in adding new products. In this case McDonalds must use the parent brand to enter a new category where the customers are not used to the presence of McDonalds. For the extension to be successful it must build off one or more of the following positioning components and communicate it successfully:

Positioning Component Communication Challenge
It extends McDonalds target market By moving in to the hotel business McDonalds must serve a new group of consumers whose needs differ from the traditional restaurants guests.
It extends McDonalds business definition The extension will move McDonalds from a family oriented fast-food chain to a business that must be able to satisfy other needs of families i.e. accommodations for weekend trips, short vacations.

It extends McDonalds point of difference By extending in to the hotel business McDonalds is increasing it points of difference compared to both businesses in the fast food category and established hotels. It extends the entire positioning The extension will make it very visual that McDonalds is now a business not only focusing on fast meals but other areas as well.

In regarding to how McDonald’s is going to manage its new product they must use the parent brand – the master brand – and through that create the value proposition. With a different product in a new category McDonaldґs can be considered to be a Branded house.


There are some advantages in a future brand extension. The McDonald brand is very recognized and that could facilitate an acceptance of McDonald’s hotels. Even though McDonald’s has struggled with health issues it is still recognized as a family friendly place and this recognition could be helpful. In addition, the risk perceived by the customers could be reduced by the fact that McDonald’s is very oriented towards families. In terms of marketing McDonald’s can use their experience from the parent brand when planning for the new category. The extension in to hotels is a way of achieving multiple customer contact points which can lead to a stronger tie between McDonald’s and their customers. The extension could also be used as a platform for revitalizing the McDonald’s brand in times where consumer’s preferences have changed. As mentioned the target market must be extended and this could be beneficial for the McDonald’s restaurants leading them to an increase in market coverage. If the brand extension is successful the experience gained could open the door for future extensions.

The disadvantages are to be taken seriously because they can hurt the traditional business model. Consumers could get confused by McDonald’s entry into a new category. This would probably foremost hurt the hotel business and not so much the restaurants. If the extension fails due to bad service, lack of management, intense competition the parent brand could suffer from this and ultimately dilute the brand identity. Target Consumer

The travel market in Illinois is divided in to leisure and business consumers served by all seven kinds of hotels. The most significant difference between the two types of consumers is their level of income and their subsequent spending on lodging. This difference must be taken in to consideration because of the gap between what is spend by the two types of consumers on lodging. The profiles of the two types of consumers are summed up below:...
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