McDonalds and Market Penetration

McDonald's has a new strategy to penetrate the market this summer. The object of market penetration is to sell more of the current product to the current market segment. This can be a low risk marketing strategy because often the company knows the product and the segment very well. What McDonald's is planning to do this summer is offer soft drinks, no matter what size, for a $1. The company would like their locations to become a destination of preference for beverage buyers for a 150 day period this summer. The reason the restaurants can offer the soft drinks for $1 is that these drinks usually account for about a 90% profit margin. Hopefully, by discounting the soft drinks they will increase consumers, which will therefore buy other products and increase the total sales mix. Some franchise owners are worried this promotion will hurt the bottom line because the high margin on soft drinks often offsets the low margins on other products. The McDonald's strategy is to steal customers not only from other restaurants but from other places consumers buy soft drinks, like 7 eleven. Then when the customer is in the McDonald's they will be introduce to other new beverages; such as, smoothies, frappes and ice coffee. The company has a strategy to add $125,000 additional new sales per store in new beverage sales alone. One problem with discounting soda is that the consumers will sometimes bypass the other new beverages for the soda on special. This kind of cannibalization is to be expected but as long as the sales increase overall the strategy will be considered a success.