In order to boost sales, McDonalds and Yum are going mobile in China, is this a good idea?

In order to boost sales, McDonalds and Yum are going mobile in China, is this a good idea?
Image Credit: Vodafone Germany

Let’s face it – being a product manager at a billion dollar global restaurant firm cannot be an easy job. Over at both McDonalds and Yum Brands (think KFC, Pizza Hut, and Taco Bell) their product managers realize just how important the China market is to their firms. Both firms realize that they need to take steps to modify their product development definition in order to boost sales in China and having taken a look at the 885M Chinese people who own mobile phones, both firms have decided that they need to work more mobile into how they do business.

The Challenges Of Doing Business In China

The past year has not been kind to either of these global restaurant chains. In all honesty, it’s not really their fault and there’s no way that a product manager could have anticipated the problems that they were going to face. A supplier that both firms used was accused by the China media of supplying both firms with expired meat. When this story broke, both firms experienced a sales slide that they’ve not been able to come back from.

It can be difficult to determine just how important China is to both firms, but if you take a look at their financial results, a story starts to emerge. Yum reports that it makes roughly half of its total revenue from the China market. In a recent quarter, they reported that their sales in China fell by 4.9%. McDonalds does not report how much money it makes in China, but they did report that their sales declined by 4.8% in the first quarter recently. This isn’t going to be looking good on anyone’s product manager resume.

As product managers, when we are faced with market challenges like this, we need get creative. We need to take a very careful look at our market and see what it is telling us. When you take a look at the Chinese consumer market, two things immediately stand out. The first is that Chinese consumers are very digital – everyone has a mobile phone. The second thing is that credit cards are not widely used. Most people pay for things with cash. If you are running a restaurant, you can just imagine how this slows everything down.

How To Add Mobile To The Chinese Side Of Your Business

Both McDonalds and Yum have decided that the way to get people to come back into their restaurants and start buying food is to add more mobile support to the buying process. Although they are taking different paths to get to where they want to be, both firms are going after the same two goals. Both firms want to allow their customers to use their mobile phones to place orders and then when they show up in the store to pick up their food, they want them to be able to pay for the food using their mobile phone.

McDonalds is interested in taking the use of the mobile device to place an order one step further. The McDonalds product managers have created what they are calling a “Create Your Own Taste” kiosks that allow customers to build their own burger choosing from 24 separate ingredients. This new feature has exceeded McDonald’s estimates by 5x and they are currently considering rolling it out to more restaurants in China.

Both McDonalds and Yum are leading the way in China. Although it is true that customers would prefer to make payments with their mobile phones rather than their purses or wallets, not many firms currently support this ability. The people who watch such things are saying that they expect mobile payments to take off faster in China than in the U.S. in part because of the lack of use of credit cards. If McDonalds and Yum can get this right, then they’ll be in the right place at the right time!

What All Of This Means For You

The challenge of doing a product management job well can often have a lot to do with how large of a market you are trying to serve. Over at McDonalds and Yum Brands, their product manager job description tells them that they’re going after a global market and they especially want to do well in China. This is not going to be easy to do, but they think that mobile is the key to their long term success.

Both firms have been hit with a scandal in China that caused their sales to drop off. In order to win back customers, they now want to start to use mobile process to allow customers to both place orders and then to use their mobile phones to pay for those orders when they drop by to pick up their food. McDonalds is taking this one step further and establishing kiosks that allow customers to custom design their burgers. Mobile payments are expected to take off in China and this represents a great opportunity for both firms.

Both McDonalds and Yum product managers are taking a big risk in trying to roll out support for mobile services in China. However, they find themselves in a difficult position where sales are declining and competition is increasing. If they can successfully make the purchasing process quicker and easier then they stand a very good chance of winning more customers. If their plans work in China, then they’ll have to decide if they want to then roll them out to the rest of the world!

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: Do you think that there will be a lot of fraud as the firms switch to an all-electronic means of buying goods?

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What We’ll Be Talking About Next Time

I believe that I drink too much soda every day. Due to the fact that I live in America, the land of excess, I can easily drink over 104oz (roughly 3 liters) of the stuff a day. My sofa of choice is Coke 0 which means that I’m probably not getting any calories or any carbs, but still, there is no way that drinking that much of anything can be good for you. Anyone who drinks soda knows something else, there is a cost associated with buying and drinking a lot of soda. If only there was some way for us to enjoy our soda but do so at a cheaper price…

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Has the time for bubble wrap come and gone?

Has the time for bubble wrap come and gone?
Image Credit: Miika Silfverberg

If you are anything like I am, when you get a package sent to you in the mail you are excited to receive it. When the package arrives, the first thing that you do is to tear it open and get to the item that has been sent to you. We generally don’t spend a lot of time thinking about how this item was packaged – how did it make it to us without breaking? More often than not it’s been packed in bubble wrap. You know, the plastic sheets of bubbles that we all used to take time to pop when we were kids. Times are changing and bubble wrap is going away. What are those bubble wrap product managers thinking?

The Honeymoon For Bubble Wrap Is Over

I’m not sure if this is going to make you feel old, but the original bubble wrap was invented way back in 1957 by the Sealed Air Corporation. Bubble wrap was a very popular product and for years it was Sealed Air’s best-selling product. The patent on this product ran out in 1981, but Sealed Air has used its manufacturing trade secrets to keep creating a unique product. Now that kind of product success would look good on anyone’s product manager resume!

The problem is that the packaging industry has become more competitive over time. With the rise of e-commerce more and more items are being shipped and this has required the use of more and more packaging materials. Alternatives such as liquid foam and agricultural byproducts have slowly been nibbling away at plastic wrap’s market share. In 2010 bubble wrap contributed 5.7% to Sealed Air’s sales. However, this had fallen to 3.6% by 2012. Clearly the Sealed Air product managers had a problem on their hands.

Just to make things a little bit more difficult, bubble wrap is very difficult to ship and store. Traditional bubble wrap ships in pre-inflated roles that take up a lot of precious room on delivery trucks. Once it arrives at a factory, it has to be stored somewhere on the factory floor. When you consider that factory space is currently at a premium and that giving any space up to storing bubble wrap can be costly, you won’t be surprised when one manufacturer calculated that the 3,000 square feet required to store bubble wrap was going to end up costing them US$75,000 per year in potential revenue.

The Challenge Of Making iBubble A Success

Realizing that they had a challenge on their hands the Sealed Air product managers started taking a look at their product development definition and thinking about what kind of product they could create that would replace bubble wrap. They knew that they had to make it easier to ship – the new product needed to take up roughly 1/50 of the room on delivery trucks that bubble wrap currently took. Once it arrived at the factory, it also had to take up less room on the factory floor. Using these design criteria the product managers went ahead and created a new shipping product that they call iBubble Wrap

iBubble Wrap is sold in flat plastic sheets that when a shipped company is assembling a package, they would then fill the plastic sheets with air using a custom-made pump that is sold by Sealed Air. Although the IBubble bubbles look similar to plastic wrap bubbles, from an end user point-of-view there is one key difference, the bubbles do not pop when pressure is applied to them.

The special pumps that users will have to purchase in order to use the new iBubble product may turn out to be an issue. The pumps currently cost US$5,500. The Sealed Air product managers hope to get this cost down to US$1,000 in just two years. This additional expense may turn off some potential customers. Sealed Air may end up either loaning or giving away some pumps in order to boost the initial sales of their new iBubble Wrap product.

What All Of This Means For You

As more and more consumers use the Internet to purchase things online, the things that they buy have to be shipped to them. This means that things that can break need to be packaged very carefully. One of the most popular ways to package breakable items has always been to use bubble wrap.

Bubble wrap has been around for a long time. It’s very easy to use; however, it does suffer from some limitations. It’s very bulky and so it takes up a lot of room on the trucks that are used to ship it and once it’s in the factory it can take up a lot of valuable factory floor space. The Sealed Air product managers have created a new product called iBubble Wrap that solves both of these issues. The customer packs the item using iBubble Wrap and then uses a custom pump to inflate the iBubble wrap sheets of bubbles.

The market for packaging products is large and will only be getting larger over time. The Sealed Air product managers have had a good run with their bubble wrap product; however, the market is now changing and so they need to reinvent their product. The creation of the iBubble Wrap product appears to be their attempt to do what their product manager job description tells them to do and listen to their customers’ needs and create a product that will address those needs.

There are a lot of alternative packaging materials out there, we’ll have to take a close look the next time that we receive a product in the mail in order to find out who wins this battle for market supremacy!

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: Do you think that the Sealed Air product managers should make it so that any pump could inflate their new iBubble Wrap product?

Click here to get automatic updates when
The Accidental Product Manager Blog is updated.

P.S.: Free subscriptions to The Accidental Product Manager Newsletter are now available. It’s your product – it’s your career. Subscribe now: Click Here!

What We’ll Be Talking About Next Time

Let’s face it – being a product manager at a billion dollar global restaurant firm cannot be an easy job. Over at both McDonalds and Yum Brands (think KFC, Pizza Hut, and Taco Bell) their product managers realize just how important the China market is to their firms. Both firms realize that they need to take steps to modify their product development definition in order to boost sales in China and having taken a look at the 885M Chinese people who own mobile phones, both firms have decided that they need to work more mobile into how they do business.

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