‘How come McDonald’s never beat Jollibee as market leader?’
Q: We read your column last Friday. It was about how a local brand can become a global brand like Jollibee assuming that Jollibee qualifies as a global brand.
But what about the case of a global brand that has never been able to beat a local brand as market leader? Is this not true with McDonald’s? It has never surpassed Jollibee as fast food market leader in terms of market share.
How do you explain this?
We heard that this is true only for the Philippines. Is this because Jollibee had established its No. 1 position long before McDonald’s opened here? In other words, is this following one of Al Ries’ “22 immutable marketing laws?” That’s the one which says: “Being first is better than being better?”
A: You are raising at least two good questions. The first is about market leadership—is market share the accepted and valid metric of market leadership? The second interesting question is about the true reason for McDonald’s’ failure to grab market leadership from Jollibee.
Is the cause traceable to Jollibee’s insurmountable first mover advantage? Is Al Ries’ immutable law of “being first is better than being better” really immutable and true in this case?
When he was here in the Philippines for a seminar among CEOs, Tom Peters of the In-Search-of-Excellence fame underscored the strategic significance of having a “metric” for any marketing concept.
“What is not measured is not managed,” Tom Peters told his audience. When his CEO audience told Professor Peters that they all have “scorecards,” the Harvard professor reminded the CEOs that they then ought to mind how correct and valid are their metrics. As a follow-up, he added: “What is not well measured is not well managed.”
Today’s marketing practices measure “market leadership” not only by market share but by one other metric. That’s a brand’s “share of mind” which is also known as the brand’s percent top-of-mind or first-mentioned awareness. Today, we use share of mind to predict a brand’s share of market. If in your UAI (usage, attitude, image) survey, for example, you find that its share of mind is lower than its share of market, then in your next quarter’s or semester’s UAI, it’s likely that its share of market will fall down to the lower level of its share of mind. In our own UAI surveys, we have found this to be true in eight out of 10 cases.
The consumer behavior logic serving as the basis for this expectation says this: “Every external change in consumers’ buying for a brand is preceded by an internal change in them.”
In other words, when consumers lessen their buying of your brand, that comes from their lowered top-of-mind awareness for it. If you as a consumer reflect on this, you’ll find that there’s a compelling experiential validity in it.
There’s actually a third market leadership metric although it has not been as accepted as the share of mind metric. This one has come by the term “share of heart.”
It was in 1997, when Michael Treacy and Fred Wiersema published their best-selling book, “The Discipline of Market Leaders,” that this metric came along. This book coined and introduced the concept of “customer intimacy.” A year later, Professor Wiersema’s book (also a best-seller), Customer Intimacy, proposed “share of customer” as the metric for customer intimacy. Later, Professor Philip Kotler coined the term “share of heart” as that metric. Today, several formulas for this metric are available. The final formula has yet to come to a “generally agreed measure.”
In its absence, it makes more practical marketing sense to stick to the first two market leadership metrics of share of market and share of mind. Your periodic UAI survey provides you with just as periodic a set of measures of them.
We now move on to your second question: “Is the cause of McDonald’s’ inability to take a market and mind share leadership traceable to Jollibee’s insurmountable first mover advantage?” It’s tempting to immediately say “yes.” However, if we find a case or a country where it was a local brand that eventually grabbed the market leadership away from McDonald’s, then the proposition is challenged. This case took place in Greece. Here, McDonald’s was the longstanding fast-food market leader until a local fast-food brand, Goody’s Restaurant, eventually “left behind the international chain McDonald’s.”
If we can uncover how Goody’s did it and then compare this causal factor to how Jollibee stayed ahead of McDonald’s in the Philippines, then we have succeeded in insighting the true story and the true key to the puzzle. According to media reports, in Greece, it was Goody’s persistence tailoring of its fast-food menu items to the local taste and preferences of the Greeks that slowly but surely drew more and more of the fast-food customers toward Goody’s and more and more away from McDonald’s. McDonald’s followed its founder’s (Ray Kroc) standards for fast-food menu.
Let’s now go back and look at the Philippine fast-food market. Taste tests after taste tests have shown that Filipino fast-food customers prefer, for example, Jollibee’s hamburger with its cooked-in taste versus McDonald’s’ original “bland”-tasting hamburger. Many say that McDonald’s was slow to learn this and adapt. The truth is that it’s the “bureaucracy” at Headquarters in Oak Brook, Illinois, that was responsible for why McDonalds Philippines took such a long time to come out with a “built-in taste” hamburger to challenge Jollibee’s. So, a key factor in Jollibee’s market share leadership comes from its “customer intimacy,” its tailoring its menu items to the changing Filipino palate.
That happens to be the very reason how in Greece, Goody’s was able to overtake McDonalds as fast-food market leader even though in Greece it was McDonald’s who was first in the market. This insight then negates the proposition that it was Jollibee’s first mover advantage that’s responsible for preventing McDonald’s in taking over market leadership. In sum, it’s adhering to “consumer centricity,” to honoring the “consumer-is- king” rule that’s the secret to market leadership.