Here’s Why McDonald’s Is Looking To Track Customer Data
McDonald’s (NYSE:MCD) is planning to use technology to make its interactions with customers more personalized, in a bid to develop a competitive edge over its competitors. By the end of this year, the company’s mobile ordering system will track data around customer habits, such as the kind of food and drinks they prefer, frequency of their orders, drive in vs. in-store eating habits, and other similar information. The company plans to use this intelligence to better serve customers by making the experience more personalized and efficient. McDonald’s has been testing this upgraded app in Japan and found that customers using the app spend 35% more on average. This increase in spend is due to the app’s suggestions to add additional items which are accepted by customers. Further, to increase convenience in future orders, these orders are remembered on the app which drive repeat sales. As McDonald’s struggles to grow revenues, this initiative could boost its average spend per customer at McDonald’s stores, driving the company’s valuation in the long term.
In Q4 2016, McDonald’s saw a decline in comparable sales in the U.S. by 1.3% year-on-year. The company’s All Day Breakfast initiative is losing steam, and it is looking at several other ways to attract millennials. Focusing on healthier alternatives has been one such initiative, and the company recently announced that it will roll out fresh patties in its quarter pound burgers soon. Technology is another way through which McDonald’s is looking to lure customers. Millennials are generally not as concerned about privacy as older generations, and are happy to share their preferences in return for better service. McDonald’s is looking to leverage this trend to drive sales through the personalized ordering app.
The average spend per customer visit at McDonald’s restaurants is a key value driver for the company, and we do not currently forecast a significant increase in this metric over the coming years.
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However, if this spend increases at a slightly faster pace and reaches $4 by the end of our forecast period (from $3.60 currently) there could be an upside of nearly 10% to our price estimate.
McDonald’s is operating in an extremely competitive environment and needs to continue to differentiate itself from other players to drive growth. Personalization of services through customer data can make the ordering process more efficient, and potentially increase the average order size of loyal customers. We believe this initiative can help McDonald’s to drive revenues in the long term.
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