Section 4. Reading Comprehension (30%) McDonald’s Pricing Strategies » Product Line Pricing » McDonald’s has a unique pricing strategy. Their Value Meals fall into the category of product line pricing. “Where there is a range of products or services the pricing reflects the benefits of parts of the range.” For example, a customer can order a Two Cheeseburger Value Meal that comes with a medium drink and fries for around $3 (prices may vary). The customer can choose to Super Size this meal to get a larger drink and more fries for a little more money or they could buy another Value Meal that might include different items at a different price. » Promotional Pricing » Almost all McDonald’s have signs and banners indicating special promotions. For example, currently the McDonald’s in Maine is advertising “Two Sausage McMuffin’s for $3”. This promotion can be seen on a large banner draped across the building on many restaurants in Maine. Promotions change weekly and may consist of different menu items packaged together. » Penetration Pricing » When McDonald’s first began to break into the coffee market, they ran a large marketing campaign in order to gain some market share in the industry. For a limited time, customers could get a free coffee every morning from 8:00-8:30 a.m. This was to promote their new coffee partnership with Green Mountain Coffee and helped spread the word that McDonald’s was now offering coffee. » Value Pricing » “This approach is used where external factors such as a recession or increased competition force companies to provide ‘value’ products and services in order to retain sales.” The most notable and recent example of this is McDonald’s “Dollar Menu”. The Dollar Menu was created because McDonald’s recognized that the economy was in decline and that their competition was getting fiercer. The introduction of the Dollar Menu, from which customers can buy a number of single products for only one dollar, is by far the most economical product line that McDonald’s has ever offered. The Dollar Menu recognizes the current economic climate and has increased the pressure on competitors. Task 1. Identify each example with a pricing strategy given in the text. (10%)