Amazon CEO Jeff Bezos recently said, “If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle”.
Over the years we have witnessed many of the most successful businesses come out with some monumental product failures. Fast-food giant McDonald’s is a notable member of this club. Although nobody would deny their immense success, they have had their fair share of product disasters over the years.
Today we will analyze what is regarded as their largest product failure to date, the Arch Deluxe.
Reinventing the Wheel
In the 1990s McDonalds was a well-established global powerhouse and the dominant force in the fast-food industry. They were no strangers to innovation, as they had already experimented with new items like hotdogs and pizza. McDonald’s unorthodox menu additions like these did not typically fare well due to the fast-food style of the chain, but some items did catch on like the filet-o-fish. Rolling out new items had little downside due to their colossal revenue stream.
McDonalds is a pioneer in the fast-food industry. They have a highly loyal consumer base due to their quick preparation and low prices. Children had become a focal point of their customer base and were the driving force of many popular items like the happy meal.
It came as a surprise when in 1996, McDonalds announced their newest item, the Arch Deluxe. The Arch Deluxe was marketed as a higher quality burger aimed at adults. The item was essentially an upgraded quarter pounder with peppered bacon, a better bun, and a “secret sauce”.
The burger was not aligned with the rest of the fast-food items sold by McDonalds, as they were trying to tap into a new customer base of more affluent consumers with higher quality preferences.
The Arch Deluxe was priced around $2.49 during its release, more expensive than the majority of their menu. McDonalds reportedly spent upwards of $200 million on marketing and advertising alone for the burger. This high capital investment was not enough to convince people to pay more for a higher quality fast food item.
The quality-sensitive consumers that McDonalds was looking to capture were not eating there regardless of any upgrades to their burgers, and their current customers were not going to suddenly pay up for fast food just because of minor quality improvements.
By 1996, people knew what McDonalds represented and were likely set on their stance towards fast food. Those who chose not to eat there were likely never going to because of a perceived lack of quality. The customers who did frequent the restaurant did so because of the convenience of cheap, quickly prepared food. The Arch Deluxe did not appeal to the primary customer base of McDonalds, and it was discontinued within a few years after poor sales performance across the country.
The Arch Deluxe simply did not align with McDonalds target audience and was never going to succeed as a higher-priced fast food item. McDonalds customers are as price-sensitive as it gets, so it was a significant reach to add the Arch Deluxe burger to the menu. Adults who were not on the fast-food bandwagon were not going to be persuaded by a new item, which was still not particularly healthy. It came as no surprise when the product was discontinued after failing to attract adult consumers.
Luckily for McDonalds, this product failure is a non-factor in the grand scheme of things. Failures are inevitable at top companies with a passion for innovation. McDonalds’ new product attempts have led to some fantastic additions over the years like coffee, salads, and their breakfast menu.
McDonalds presently has a diverse menu that appeals to their price-sensitive customer base, while also making slight improvements in the overall nutrition of their offerings to attract on the go consumers. Through years of innovation and listening to the market, they have established themselves as the leaders in fast food with no signs of slowing down.