It doesn't help that the chain's senior management appears to be using trial and error to figure out how to reverse its lagging fortunes. First there was "Made for You," the new food preparation system which promised to deliver tailor-made burgers in record time (introduced only 25 years after its rival BK promised "you can have it your way"). The system was costly to install and did not improve speed of service dramatically—it worked efficiently only when customer volumes were very high—or customer ratings of the taste of McDonald's food. When that didn't work, it was good-bye "Made For You", hello "Great Tastes Menu," and a focus on new products. Sales remained flat, so good-bye emphasis on new products, hello restaurant remodeling and a $1 value menu.

Instead of turning around the company, these initiatives basically brought McDonald's up to par with Burger King and Wendy's—not a bad thing given the increasing importance of taste and demand for personalization, McDonald's needed to bring itself up to date just to stay in the game.

But a complete reversal of fortune will require a whole new way of thinking at McDonald's. First, senior management must stop the expensive guesswork at what will get consumers to frequent McDonald's. "Nobody wants to discount, but when the company gets into a panic over same-store sales, they always turn to discounting," one franchisee told Advertising Age after hearing the latest turnaround plan. Discounting might bring in customers in the short term, but in the long term it negatively impacts perception of taste and quality and that hurts traffic.

Second, senior management needs a strategy, a framework to guide its decisions in pursuit of performance objectives. "Made for You" certainly wasn't one—it was a food prep system. Nor was the "Great Taste Menu"—it was a tactic. Same goes for remodeling and a $1 value menu.

When it comes to a marketing strategy, McDonald's sorely needs to look at the targeting decision. For far too long, it has focused primarily on super heavy users and also followed an occasion-based segmentation (i.e., one segment goes for a meal for themselves, one goes as a special treat, one goes because the kids begged to go). But virtually everyone in the category focuses on super heavy users and, as we've seen time and time again, super heavy users are often price-conscious, deal-prone, and consequently disloyal to the brands they buy. And occasion-based segments are not mutually exclusive—one person goes because of the kids on Tuesday but after a hard day on Thursday goes for a special treat on the way home from work—so it offers little in the way of concrete guidance on whom the most profitable customers are and how to motivate them to buy.

Thirdly, senior management has to recognize that ignorance is not bliss; there is a serious service problem at the restaurants that can't be covered up with a coat of paint or new uniforms. Superficially addressing the problem isn't going to help perceptions of taste and quality if service remains poor and the restaurant—in particular the restrooms—remain cluttered and dirty. Customers won't be fooled and they'll wonder why McDonald's just doesn't get it. Mandating some basics like clean restrooms needs to happen immediately and McDonald's can use information about its most profitable target to build a service organization around meeting the needs of these customers most efficiently.

As a restaurant industry analyst for Credit Suisse First Boston recently said, McDonald's has "always looked for the easy answers, never making the hard choices." But if it wants to restore the grandeur of the Golden Arches, McDonald's needs to make the hard choice to stop speculating on its future with copy-cat tactics and invest the time and money in fixing what is clearly broken.

Anyone who spends much time in front of the television will eventually come to the same conclusion that we have: advertisers believe that the vast majority of the viewing audience on any and every channel and time is an expert detective. A regular Sherlock Holmes or Hercule Poirot they must think we are. How else to explain the regular broadcast of mystery ads, the ones that make you go, "huh?"

This summer, to get a clearer picture of how bad the problem is, we analyzed over 4-hours of a combination of day-time, prime-time, and late-night advertising from different channels on different days and found some terrific examples of advertisements run by marketers who clearly wanted to perplex and confound their audiences. While some received critical acclaim for their brilliant cinematography or imagery, and certainly many were funny, we still didn't get the selling message; sometimes we just barely caught the logo or brand name.

There were plenty of runners up, but here are the five ads from summer 2002 that had us scratching our heads the most about what they were saying [and also about what senior management at this company was thinking]:

Citrona. The scene is an apartment and a young man dressed in a baseball shirt sits on his couch watching TV. He sees his friends on the news—they just caught a home run ball hit into the stands. He looks at his ticket and realizes it was hit to his seat just as his friend says to the reporter, "We told you not to leave early." Flash to a bar scene with a voice over saying "the night is full of choices. Choose Citrona." Flash to people drinking Citrona. Well, we got the name and that you drink it in a bar, but what is it? Why should we choose it instead of a beer? The answer can't be found in this spot.

Geico Direct. We encountered three spots for Geico Direct in our research, all of which were obscure. Geico's talking gecko lizard is joined by the former spokesdog for Taco Bell in one; the lizard drives a fancy red car and gets to park in the employee of the month spot in another; and he arbitrates a dispute between two robot action figures in a child's bedroom in the third. Only at the end of the spot is there a message about what Geico is—car insurance—and we had to really study the spots closely several times to get the very subtle selling messages about quick resolution and customer service, which were presented before an explanation of what Geico even was so they made little sense at the time they were presented.

Imitrex. This is one of the worst examples of DTC advertising we have ever seen. Set in a hospital maternity ward, a nurse picks up a newborn and brings the baby over to the presumed father and sister to hold. Meanwhile a voice says, "Imitrex. Ask your doctor for a free sample." There's no other mention of what Imitrex is or what ailment it alleviates—given the setting in a nursery we thought perhaps it was something for babies. We looked it up on the Internet and discovered it's in fact a migraine treatment. We doubt many people go as far as we did to figure it out though.

Juicy Fruit Gum. This spot spoofs kid shows like Barney where an adult and a big stuffed animal sing about sharing and caring. In this case, a big stuffed fish and a cheery blonde are clearly lip-syncing a song about "sharing is caring," when the fish notices a pack of Juicy Fruit in the front pocket of the woman's overalls. He gestures for a piece, but the woman shakes her head "no." The music continues to play as the fish grabs the pack of gum and tries to lumber off with it, but the woman tackles him and rips his fin off. They did get the brand name across, and we laughed out loud when she tackled the fish, but nevertheless, it was a truly bizarre execution with no overt selling message.

Pontiac Vibe. We got that the commercial was for a car only because of the name "Pontiac", but it could just have easily been for clothes or electronic equipment. While the heavy base of club music thumps along, a man loads what looks like electronic equipment into a car as we flash back and forth to scenes of him playing records and people dancing in a club. We see him driving presumably to the club as the music continues and some text appears across the screen encouraging us to catch our own vibe and we see the Pontiac Vibe logo. Maybe the subtle message was it has a good stereo system or DJ's drive it, we just didn't know what it was about.

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A couple of years ago, a colleague told us about an incident she had in a marketing class she was taking as part of an MBA program. Her class was discussing a case on Xerox and the issue of customer satisfaction. Her professor, formerly of the Harvard Business School and McKinsey, asked the class what they thought about the company's plan to pursue a strategy of 100% customer satisfaction and 100% customer retention to improve performance. Our colleague bravely answered she thought it was a bad idea.

While achieving a higher level of customer satisfaction than competitors would offer an important advantage to Xerox and help performance, she explained, 100% was not a profitable goal—after a certain satisfaction level, to reach 100% offered diminishing returns on investment. Same for 100% retention—why keep unprofitable customers? The professor laughed out loud at our colleague's response and said she was like one of the dittering members of the company's board of directors who opposed the strategy. Xerox wisely went ahead, he explained, and has become a model company for others to follow, just a few points short of their goals. But now that Xerox has had to disclose accounting improprieties that artificially inflated profitability and the investigation into its conduct continue, we wonder who's laughing now.

For over a decade, like this professor, management consulting firms have preached the virtues of 100% customer satisfaction-retention. The (flawed) underlying assumption is that all customers are valuable and if we could offer "perfect" service, we can keep them all thus achieving maximum profitability. Never mind that 100% has proven nearly impossible for the vast majority of companies—most earn a "C" grade—it just doesn't make financial sense.

Let's first look at retention. One Mastercard customer makes thousands of dollars of purchases and pays the minimum balance on time each month while another rarely uses the card, but calls ever year to avoid paying the membership fee and at least once a month to demand a lower interest rate. Are both customers of equal value to Mastercard? With limited time and resources, which customer would you tell Mastercard to drop and which to keep?

What about satisfaction? The global norm score for customer satisfaction for any marketer is about 74%, as we said earlier, a "C" grade. The marketer who improves this grade to a 90% or 95% blows away the competition and moves to the head of the class. However, the money and effort required to move from a 95% satisfaction level to the 100% level is often enormous relative to the benefits. Our research suggests that as customer satisfaction increases, sales and profits increase—up to a point. But as the cost of making customers happy moves beyond, say, 92%, the costs associated with increasing levels of satisfaction begin to erode profits.

We should be clear here that we aren't saying keeping and pleasing customers isn't critical to success. The questions are who do you want to keep, how far do you take satisfaction, and what will it cost.

For more insightful marketing discoveries, visit http://www.copernicusmarketing.com/discover/index.htm

Have a hot discovery for our next release? Contact us at info@copernicusmarketing.com

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"Conventional wisdom says creating a brand is about differentiating your product," say Kevin Lane Keller, Brian Sternthal, and Alice Tybout in their interesting piece in the Harvard Business Review, "Think again." Their main message: differentiation only works if you make it relevant and compelling to buyers. The article raises some important points about establishing a frame of reference and drawing similarities between your brand and those of competitors so buyers know what problem your product or service solves and then explaining how you solve it differently.

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This coming October 16 and 17, at the Waldorf=Astoria in New York City, Copernicus will proudly co-sponsor The 50th Annual Marketing Conference: The New Fundamentals of Marketing. Speakers from Copernicus and companies including Chubb, The Stanley Works, and Verizon will explore the marketing approaches that work in the uncertain business environment of today. For more information about the conference and to register, visit www.conference-board.org/marketing.htm.

Kevin Clancy, Chairman and CEO of Copernicus, will present counterintuitive approaches to marketing and Steve Tipps, Senior Vice President at Copernicus, will give a talk with Charlie Rutman, President of Carat North America, on improving the return on investment of media plans. We'll have downloadable copies of both presentations in next month's edition.

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