McDonald's Taiwan drops 'one price fits all' strategy

The three districts are the the rural south and east; the industrial north and west (plus three southern cities); and entertainment and high-rent districts across the island. Future prices will be adjusted according to income levels, the consumer price index and other factors for each district.

Local media have already speculated that some consumers would face immediate increases of up to 20 per cent, although that claim was denied by McDonald’s Restaurants Taiwan director of communications and public relations Jesse Tsao.

“So far we have only adjusted 19 out of 150 items. The average increase is less than two per cent,” said Tsao.

For McDonald’s, tier-pricing is becoming part of its global strategy. To stay competitive in an era of food inflation, the US franchise is abandoning its ‘one price fits all’ approach.

Taiwan is one of a growing number of McDonald’s franchises in Asia to adopt tier-pricing, with Japan launching a five-district plan last September. South Korea is the last major holdout. However, the move toward tier-pricing is a first for international marketers in Taiwan, although according to Tsao a handful of local beverage franchises vary prices around the island.

In Japan, McDonald’s was also the first marketer to introduce tier-pricing, according to Tsao. “Japan was a good choice of model for us to follow,” he said.
“The economic situation in Japan is similar to Taiwan. Both countries have crowded restaurant sectors and face intense competition. Operating costs in Taiwan vary widely due to rent, labour and transportation.”

Tsao said the switch to tier-pricing will have minimal impact on the company’s advertising, since price-based ads are used only for special offers, which are priced the same across Taiwan.

In Taiwan McDonald’s is using the consulting firm, Revenue Management Solutions to analyse operating costs, customer demand, price sensitivity and Government price indexes to create a map of the price districts.

For the menu-board price changes, McDonald’s is scattering price rises on different items rather than instituting blanket increases. Tsao said the reaction from Taiwan’s consumers had been mixed.