At the turn of the century, McDonald’s stock lessened from $48 to $32 per share due to fears that the market was saturated, and new McDonald’s restaurants were taking from those already established. As a result, McDonald’s decided to diversify, and it allowed other restaurants to implement new products and services. In Switzerland, CEO Urs Hammer decided to pursue the hotel industry. Hammer had a history in the hotel industry, and he gained approval to open the first McDonald’s Hotel. The hotel was in Rumlang, a suburb of Zurich (Michel, 2005). The purpose of this paper is to discuss the three extended p’s of the marketing mix in relation to the first McDonald’s Hotel: people, process and physical evidence. The traditional marketing mix is thought of as consisting of four p’s: product, price, place, and promotion. In marketing, the product should be what customers want and are expecting to get. It should be reasonably priced and seen as valuable t that price. It should also be available in the place it is needed for convenience. Lastly, promotion should be tailored to customers, so it will be communicated in a way that is likely to be influential. The four p’s adequately covered what a marketing mix should encompass, but it did not include the service industry. In the 1970’s, the marketing mix was expanded to include the service industry. This included the addition of three p’s: people, process and physical evidence (“Marketing Theories,” n.d.).
People was the first thing included in the extended marketing mix because without them, there is not one business that could survive. This includes salespeople, managers, and janitors. Every person on staff plays a role or contribution to keep the business running. Having the right people do the work reflects upon the business, so hiring practices are essential to a business not only for utility but for marketing. People impact the image of the company.
For the McDonald’s Hotel, the person with the most impact was the McDonald’s CEO Urs Hammer. He had a tendency for the hotel industry due to his background. This was a strength because McDonald’s was looking to diversify and Hammer had experience in another industry, but it also urged him in a direction based on factors that may have blinded him to risks. However, the young people in the area, potential customers, were considered trendy and liked to experience new services. The elderly appreciated tradition, so they would require employees who adhered to tradition and niceties. One of the greater hiring challenges was whether or not to hire foreigners, as they were more apt to do some of the jobs required in the hotel industry. Hammer tried to hire people who were local and made permanent rather than seasonal positions to increase the consistency of services (Michel, 2005).
Process, the second extended p in the marketing mix, involves the delivery of a service (“Marketing Theories,” n.d.). McDonald’s Hotel offered a modern room detached from the nearby McDonald’s restaurant, so customers could know that other restaurant patrons did not have open access to the hotel. Hotel visitors were offered automatic check-in services and a 110-care underground parking garage. In addition, the restaurant was open 24 hours to accommodate travelers around the clock. Twenty-four hour restaurants were not the norm in Switzerland (Michel, 2005).
Lastly, physical evidence is the tangible inevitability of every service, be it a printout with information or a business card (“Marketing Theories,” n.d.). Physical evidence includes the physical environment where the service occurred. In McDonald’s Hotel, this includes its five-story building, 211 rooms, curve-walled showers, and parking garage. It also includes any coupons for the restaurant and the restaurant itself. The physical environment must match other components in the marketing mix (“The Extended Marketing,” n.d.). For example, if McDonald’s was a high-end, black-tie restaurant, the price of the hotel room would be higher, and the amenities would be greater. However, McDonald’s is a fast-food restaurant focusing on low-cost food that is delivered at a decent quality with speediness. It is a convenience restaurant. Therefore, the hotel must be convenient. This is why it is located next to a 24-hour food source and has automatic check-in.
McDonald’s decision to diversify may have unintentionally included the hotel industry due to Hammer’s previous experience in the industry, but it was a low-risk attempt at diversification due to the size of the McDonald’s business in relation to the single hotel. The hotel can be considered a pilot in a project that may have expanded McDonald’s into hotel-restaurant chains across the globe. Despite its novelty, McDonald’s Hotel had a purposeful marketing mix that included the extended three p’s of the service industry. People were hired that would meet the expectations of patrons in the area, and they were led by a person with hotel experience. The process was also catered to the region and the needs of its consumers by providing automatic check-in. Lastly, physical evidence was in line with the rest of the marketing mix. The physical environment was much like McDonald’s itself. It is 24-hour, convenient, adequate but not too plush, and it is inexpensive. The number of hotel chains in America is a barrier to market entry, but it Switzerland, this is not a barrier that stands in the way. Therefore, it was a low-risk location to attempt the hotel business, and it did not harm the overall corporation to give it a try.
- “The Extended Marketing Mix: Physical Evidence.” (n.d.). Oxford College of Marketing. Retrieved from http://blog.oxfordcollegeofmarketing.com/2013/08/09/marketing-mix-physical-evidence-cim-content/
- “Marketing Theories – The Marketing Mix – From 4 P’s to 7 P’s.” (n.d.). Professional Academy. Retrieved from http://www.professionalacademy.com/blogs-and-advice/marketing-theories—the-marketing-mix—from-4-p-s-to-7-p-s
- Michel, S. (2005, Oct 20). McDonald’s adventure in the hotel industry. Thunderbird School of Global Management. Retrieved from file:///C:/Users/Robert%20Rahim/Downloads/Golden%20Arch%20Case%20Study.pdf