What a Happy Meal can tell us about business model patterns
Happy Meal is sometimes more than just a happy meal, especially if the users (kids usually), customers (parents usually), the management (McDonald) and the product development team (the franchising restaurants) are happy about the results.
This time, a simple happy meal also make the cooperations partner (Schleich) and observers (I and readers of this article) happy because we can see the combination of different business model patterns behind.
The basic business model: Franchising
According to Statista, McDonald franchised more than 38k restaurants world wide in 2019. This basic business model is described shortly in the St Gallen Navigator as follow:
"The franchisor owns the brand name, products, and corporate identity, and these are licensed to independent franchisees who carry the risk of local operations. Revenue is generated as part of the franchisees’ revenue and orders. The franchisees benefit from the usage of well known brands, know-how, and support."
Cross-Selling as an extended business model
November 2019 Happy Meal turned 40 since its introduction. In the period of December 2020 in Barvavia Germany, McDonald cooperated with Schleich to cross-selled some toys in its happy meals, including an exclusive donkey figure. Cross-selling as a business model is described by St Gallen Navigator as followed:
"In this model, services or products from a formerly excluded industry are added to the offerings, thus leveraging existing key skills and resources. In retail especially, companies can easily provide additional products and offerings that are not linked to the main industry on which they were previously focused. Thus, additional revenue can be generated with relatively few changes to the existing infrastructure and assets, since more potential customer needs are met."
Thanks to Happy Meal, McDonald is literally the largest toy-reseller/distributor of the world with more than 1,5 billion toys each year.
Shop-in-Shop: A "call-for-action" advertisement on the Happy-Meal box
My 6-year-old is curious about QR-codes. He would ask for my smartphone to scan any QR-code he comes across.
On the box of the current Happy Meal there is an Schleich-Advertisement for purchasing more figures (e.g. buy 4 figures while paying only 3 of them). If you see a bit more closer you will find another cooperation partner "SMYTHS" behind. No matter if you are just a fan of Schleich figures and want to collect the full set of animals, or if you are interested in buying more while paying less, once you scan and visit the SMYTHS online store, it is probably that you will pay for more than you originally wanted to, especially in the Christmas time, when people are having difficulties about how to look for suitable presents.
Shop-in-shop is another business model pattern, described in the St Gallen Navigator as follow:
"Instead of opening new branches, a partner is chosen whose branches can profit from integrating the company's offerings in a way that imitates a small shop within another shop (a win-win situation). The hosting store can benefit from more attracted customers and is able to gain constant revenue from the hosted shop in the form of rent. The hosted company gains access to cheaper resources such as space, location, or workforce."
Robin-Hood: A frequently used business model pattern with an unusual name
As described in the St Gallen Navigator, Robin-Hood means:
"The same product or service is provided to ‘the rich’ at a much higher price than to ‘the poor’. Thus, the main bulk of profits are generated from the wealthy customer base. Serving ‘the poor’ is not profitable per se, but creates economies of scale, which other providers cannot achieve. Additionally, it has a positive effect on the company's image."
My consideration of this pattern in the case of a Happy Meal was that, I can not understand how McDonalds can earn money by selling a Happy Meal at the price of 3,99€, in which a Schleich figure would cost more than 5€ on Amazon. I made a joke that I were the poor guy who benefited from the toys being sold to the riches at a much higher price. Schleich is the "Robin Hood" behind by making this possible.
My personal interpretation of the TRUTH is that:
Schleich is selling some old figures (at least the dinosaurs this time) from their storages. In this way the storage cost could be reduced, the storage space could be freed, the unsold and out-of-date animal figures could be turned to cash flow (for they have earned enough margin before 😛).
Schleich could offer these figures to McDonalds at a very low price, maybe less than 1€ so that McDonalds can still earn money from the 3,99€. Schleich could benefit from Point 1 and use these figures as advertisement (see "shop-in-shop") for more new figures selling at higher prices.
It is also good for Schleich to do so in the time of global pandemic, in which the offline sales are catastrophically influenced, especially because of lock-down.
It is IMPOSSIBLE to calculate the margin behind in such a business case with the limited information available. One thing for sure, neither McDonalds, nor Schleich, nor SMYTHS is doing (or willing to do) a negative business and really plays the role as Robin Hood.
Last but not least: Lock-In
Lock-In is described as follow:
"Customers are locked into a vendor's world of products and services. Using another vendor is impossible without incurring substantial switching costs, and thus protecting the company from losing customers. This lock-in is either generated by technological mechanisms or substantial interdependencies of products or services."
A typical lock-in example is Apple. Once you are in the Apple Ecosystem it is difficult for you to switch (in my own case since 2008 😂). One counter measure from the consumers' point of view is to lengthen the life span of a certain product (in my case I change an iPhone every 5 years and a MacBook every 10 years). Another counter measure is to increase the frequency of change. E.g. I know someone who would always buy the most up-to-date Apple products. He applies an Apple product probably while maintaining the status good enough so that he can resell this used product at a relatively good price and so as to buy the next new thing.
From the producer's point of view, the product or service has to deliver a high grade of user-friendliness to make sure the customers are happy with the lock-in, which in most cases of Apple products.
To be honest, the Schleich figures are really very well-made and worth collecting. So we are glad to get locked-in into a world full of different animals.
A sustainable and successful business will never rely on a single and simple business model. As mentioned in my other blog concerning the "Marvel Principles", success belongs to the past, an innovator should be courageous enough to challenge his/her own success formula to ensure a sustainable growth and continuous innovation. Combine new business model patterns, generate new ideas, test these ideas and implement them into business models of your own. This is the true INNOVATION.
One more thing