How to Grow A Business Through Products & Services Expansion
Updated: Feb 27
Ray Kroc - the Godfather of the franchise business model. He purchased the rights to a little company called McDonald's that he swindled from the companies’ founders. There are 7 proven strategies to business growth. In this seven series blog post, we’ll share anecdotes and assets needed to execute. Here, we are kicking it off sharing the products and services strategy.
Kroc initially worked as a piano player, a paper cup and store to store milkshake mixer salesman for Prince Castle. While on his duty of selling the multi-mixer, he stumbles across McDonald's and saw how successful the restaurant was run by Dick and Mac McDonald. At this time (1954), they just sold burgers, fries, and beverages. The brothers’ reasoning for this was that they wanted to focus on quality and quick service (McDonald's).
Today, McDonald's claim that they have 10 billion sold. The key to expanding the products and services is to sell more and more to the existing customer. Here are the four key points to expanding through products and services:
1. Revenue per Customer: Share of Wallet
Wallet share is "the percentage of customers' spending within a category on a specific product or company"; in this case fast-food/McDonald's. So, even before we can bring up to the customer if they want drinks or fries with their burger, they have to have the wallet share first. If a customer only has enough money for just one burger, then that customer won't be able to spend more. Therefore, being able to get each customer to spend more, rather than having more people but little purchases, the revenue per customer is much higher and successful in the long term. This creates more loyal and the business will have a better retention rate when looking at numbers.
2. Sell Complementary Products
As we know, we do not see sushi on the menu, why not? First of all, it's a completely different cuisine! Second, that's because sushi does not compliment burgers, fries, and a soda. That's where McDonald has gone right (if they ever add sushi, they must really have ran out of ideas to add to the menu or maybe it's for extra media boost?). Since Kroc took over, during his time he started adding more to the menu:
1968: The Big Mac
1973: The Quarter Pounder
1975: The Egg McMuffin
1983: Chicken McNuggets
These are all goods that are versatile, stay within what McDonald's is as a fast food chain, and compliment their other products on the menu! By expanding their menu and adding appetizers/sides, breakfast, and even (pescatarian) diet friendly. These are all products that are well known and still a big hit today! That's why these burgers are still on the menu to today. By knowing the numbers and what they mean, that's how one can be successful. For more additions that they added later on, here's the history timeline.
3. Package & Bundle
"Would you like that supersized?" This was a terrifying phrase (and option) introduced in April 1992. It opened everyone's eyes when thinking about the fast-food industry. In order to increase the average order value, McDonald's came up with a Supersize option where they up-sized French fries and soft drinks to an extra large size. However, "The burger giant said it has begun phasing out Supersize fries and drinks in its more than 13,000 U.S. restaurants and will stop selling them altogether by year’s end, except in promotions." (NBC News). Afterwards, the company slimmed down its menu and added a "East Smart, Be Active" campaign. Within their menu, they added healthy options including:
Vegetable/Yogurt options (with Happy Meals)
Speaking of their infamous Happy Meals (and mainly regular meals), this goes into packaging and bundling and how that helps sales soar. By offering the meal and how it may only be a couple cents extra, how could the customer say no and the company itself make a little extra? According to Forbes,
"a buyer's affinity for such deals comes with a big caveat, according to new research: These groupings are often successful only if the consumer is given the option of buying the same products separately."
With having the right pricing strategies when it comes to product bundling, the revenue per customer skyrockets and it becomes a win win situation, as it seems like through the customer's eyes.
4. Customer Acquisition: Invest in Advertising
We can't stress how important advertising is to a company. Here's a blog where we discuss the importance of marketing and how word of mouth just does not cut it. In order to increase the number of customer visits, there needs to be a way to get people to keep coming back to the store multiple times. With advertising, this will be a tool where there will be more and more openings plus opportunities. Advertising whether it's a commercial or on social media, it's going to attract new and bring back the existing customers. One of the benefits of advertising is that it's trackable! Trackable in terms of knowing what works and what doesn't. Being able to know customer acquisition is just as important as knowing what to have on the menu. We can then take a look at how to get a new customer and then look at the numbers if new customer visits increase.
Here's a video with further explanation on not only the products and services strategy, but the other six, in order to expand the growth of a business.
Product & Services Expansion - Is It Worth It?
If this excerpt on McDonald's isn't convincing enough that expanding products and services is successful to a business, then hopefully the numbers can show the worth. Here's a full menu of what McDonald's offers today. There was too much that we couldn't insert a photo in this piece, but below is what McDonald's menu used to look like in 1967.
Since then, McDonald's "has 145 items, according to Bloomberg, citing menu researcher DataSsential in Los Angeles" (Marketplace). Looking at the prices on the menu from 1967 compared the the current menu of 2020, talk about success and dramatic change. When we look at how many customers McDonald's feeds per day, according to Fiscal Times it equals to "68 million people per day, that's about 1 percent of the world's popular". That data was from 2012, so you can only imagine the number only climbing. The daily customer traffic is more than the population of Great Britain, a whopping 62 million (Fiscal Times). The return on average assets increased to 16.6% from 16.4% in 1998; return on average equity increase to 20.8% from 19.5% in 1998. At that time, slowly but surely numbers have escalated since then. Here are some more astonishing numbers over time with McDonald's success.