“The key to making acquisitions is being ready because you really never know when the right big one is going to come along.”
– James McNerney
We can’t talk about McDonald’s without thinking about a burger or the World famous Big Mac. The iconic company founded by Ray Croc is today one of the most well recognized fast food brand across the world. It is known to have a very strict plan of work for all the work done in house.
Parcel deliveries and drive thrus are an important part of their revenue. It allows McDonald’s to sell more products without having to seat people. This allows it to have more sales.
McDonald’s has recently acquired “Dynamic Yield”, a startup based in Tel Aviv, Israel for over $300 million, in order to improve its ability to predict the kind of menus a customer would want to eat when ordering at a drive-thru or at via their mobile app.
Dynamic Yield allows retailers to use algorithmic models, known as ‘decision logic’ technology to understand a customer’s preferences and influence his/ her choices. Example: If you add an item to an online shopping cart, it tells you about what other customers have bought and helps you select the other similar products.
This is McDonald’s largest purchase since the Boston Market (which they acquired in 1999). For a company with an income of $6 billion in 2018, this was a very easy purchase.
So the main question is why did they decide to invest in big data? Why not just hire an external agency that could do it for them?
McDonald’s serves around 68 million customers every single day. Majority of these people prefer to pick up their orders from the drive-thru window. This is where McDonald’s aims to deploy Dynamic Yield – for understanding and influencing consumers driving by for their orders.
This is what the present drive-thru window looks like: When you drive up and place your order at any McDonald’s, a digital display greets you with a handful of banners items or some promotions. As you move forward towards the ordering area, you immediately get the full menu. Both these slides are currently static, excluding the obvious changes like rotating new offers or switching from breakfast to dinner.
In a pilot program at a McDonald’s in Miami, which is powered by Dynamic Yield, those displays are now different. Algorithms crunch even small data like the weather, time of day, local traffic, nearby events and of course the historical sales data, both at that of the specific outlet and around the world.
With the new machine-learning program a remarkable display of real estate goes towards showing customers what other items are or have been popular at that location and prompting them with potential up-sells.
Ex: while exiting you receive a message like, Thanks for your Happy Meal order; maybe you’d like a Coke to go with it.
These small changes help McDonald’s sell more. With this machine-learning system, the real benefits will likely be immeasurable.
This system also provides many other benefits. Like if the drive-thru is moving very slowly, the algorithm can automatically switch the menu and can show items that are simpler to prepare. This will help speed things up. On the other hand, the display can also highlight more complex, pricier sandwiches on a slow day.
McDonald’s is looking to spread this technology to all its outlets all over the world. Dynamic Yield adds a personal layer to McDonald’s tech stack.
“It’s probably is less about the product and more about the data scientists, the team that comes with it and their ability to move quickly with us,” says Mr. Daniel Henry, McDonald’s executive vice president.
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