“Would you like fries with that?”
Everyone knows this phrase, made popular by the most famous burger restaurant in the world, McDonald’s.
I have a huge admiration for the golden arches – and it’s not just because of their business model, scalability and global footprint.
No, what really excites me is how they have designed and optimised their menu to maximise profitability.
As an online merchant, you can actually apply the same core principles to your sales strategy as McDonald’s. So take a (lettuce) leaf out of Mcdonald’s burger and find out how.
In this article:
- Why Big Macs are a big gimmick
- The McDonald’s Product Mix Analysis
- Choose your fries wisely
- Timing is everything
Why Big Macs are a big gimmick
The idea that McDonald’s is a hamburger franchise is not entirely accurate. From a branding perspective, sure – they sell burgers. But the thing is, McDonald’s doesn’t make their profit from selling burgers. They make it from fries and soft drinks.
Next time you order a burger, just wait for the question, “Would you like fries with that?”, or “Would you like to make that a meal?”
What they’re doing is cross-selling – increasing the order value of your Big Mac by adding the higher margin french fries and Coke. Cross-selling is about offering customers another product that complements or enhances their original purchase. This is different from up-selling, which involves selling a more expensive alternative to the original product (like upgrading your medium fries to a large fries), although the two terms are often used interchangeably.
Have you ever tried just ordering a soft drink at McDonald’s? They almost never ask if you want a burger. Big Macs are just merchandising gimmicks so that you order a Coke.
The same principle applies for more up-market restaurants. They don’t make money off the food. They make it on the wine list.
My point is, every business has a suite of products with varying gross profit margins. The key in maximising your profitability is to optimise your product mix and take advantage of those cross-sell opportunities.
Let’s take a closer look.
The McDonald’s Product Mix Analysis
Below is a basic product mix analysis for a fictitious McDonalds franchise that sells just two things – Big Macs and Big Mac Meals (that’s the burger, plus french fries and a Coke.)
The business made a gross profit of $34,765 for that day. This profit is based on an equal sale of both Big Mac burgers and Big Mac meals.
If the business was to focus on selling 25 per cent of the customers that only bought Big Macs the more profitable Big Mac meal, this would increase overall gross profit by an additional 6 per cent.
This is because they’re selling more units of the higher gross profit meals.
It’s much cheaper and easier to cross-sell to existing customers than to find new ones. So, rather than just telling your employees to “sell more units” to increase sales, think about how you can cross-sell customers to buy other complimentary products.
Here are a couple of key lessons to take from how McDonald’s does it.
Choose your fries wisely
Try to anticipate your customer’s needs. Just as fries have become the default complement to burgers, you need to cross-sell your customers products that supplement and enhance the original product.
Price is a factor here. It’s best to stick to products that are considerably cheaper than the original product, or customers will start to look at it as another major purchase they have to think about, instead of a no-brainer add-on to the original product.
Again, think about when the kid behind the counter at McDonald’s asks if you want fries with that. You don’t even have to think about it, right? That’s partly because you see the fries as a natural addition to the burger, and partly because the price increase is relatively minimal. That’s what you should be aiming for with your own cross-selling.
It’s also important that you don’t try to cross-sell your customer the whole menu. McDonald’s keeps it simple when they ask if you want fries with that, or if you want to make that a meal. They don’t also try to sell you McNuggets, a coffee, a box of cookies, a Filet-O-Fish and a McRib in the same breath. Give the customer too many choices, and you risk overwhelming them, at which point they’ll just stick with the original product – or maybe even tap out altogether.
Timing is everything
The reason cross-selling is such a simple, yet powerful, technique to improve sales and profitability is that your customers are already in buying mode.
McDonald’s won’t ask you if you want fries with that while you’re perusing the menu, or just walking past the store. They wait until you’ve already committed to the burger to ask about the fries – at that point, you’re already in buying mode, so you’re more likely to make that additional purchase.
Cross-selling, then, is largely about timing. Wait until your customer has already committed to purchasing something from you, and then go in with that additional offer. Don’t scare them off before they’re on the hook.
For an eCommerce retailer, that means hitting your customers with the cross-sell in the shopping cart, when they’re just about to complete their purchase; on the ‘thank you’ page (if you don’t want to distract them from the original purchase); or through an email or retargeting ads shortly after the purchase, while they’re still in buying mode.
So there you have it. Who knew Macca’s had so much to teach us?
What’s the “fries and Coke” of your business model?
Let us know!