McDonald’s First Major Acquisition In Years Could Be A Game Changer

Food & Drink

As buying tech startups has become one trending pursuit for brands of all kinds seeking to sharpen their competitive edge, McDonald’s purchase this year of Dynamic Yield, a seven-year-old Israeli startup that helps brands personalize offerings, could help the fast-food giant do just that. 

One glimpse of the potential for McDonald’s can be seen at a recent event Dynamic Yield hosted in New York, where it’s now based. Well over 200 attendees from across the retail industry including Barnes & Noble and PacSun gathered to learn how they could market and sell to consumers on a personal level. McDonald’s global CMO Silvia Dias Lagnado was a speaker. 

“How do you serve almost 70 million customers every day and still maintain a 1:1 relationship with your very diverse customers?” the agenda page describing her talk asked. 

McDonald’s has begun to roll out Dynamic Yield’s technology in 700 of its drive-throughs across the U.S. to vary suggested offers by time of day, weather and trending menu items, McDonald’s CEO Steve Easterbrook said on its April earnings call. The technology also will allow McDonald’s to suggest items that make peak times easier on its restaurant operations and crews from data collected based on live restaurant traffic at drive-through. 

McDonald’s has about 38,000 locations in over 100 countries, mostly franchised. 

“Long term this technology will work across all of our digital platforms including our self-order kiosks and our global mobile app,” Easterbrook said. “When our technology ecosystem is linked, it will provide a seamless ordering experience for our customers and we’ll leverage our size and scale to take advantage of being one of the first of brick-and- mortar companies to integrate decision logic into the customer ordering process.” 

Yes, seamless is the key word there. 

When Dynamic Yield’s co-founder and CEO Liad Agmon was introduced to McDonald’s in 2017, he had showed up at the meeting to wow McDonald’s with this: “I built a custom kiosk and custom mobile app,” he said in an interview, adding he ordered something on the mock mobile app and scan QR code and finished the transaction through the digital kiosk. “We demonstrated how we closed the journey between mobile and kiosk and other digital interaction. We can change the entire menu experience to be personalized.” 

As McDonald’s is fast rolling out digital order kiosks, pushing mobile order and pay and online order for delivery via UberEats, “seamless” is critical to helping McDonald’s winning and keeping customers beyond using machine learning and data science to recommend personalized offers.

Just look at the online reviewsof McDonald’s app, and one can see there are still many kinks that McDonald’s needs to work out. 

“Coupons don’t work!” a McDonald’s mobile app reviewer with username Eric Nightraven said this week. “There will always be some kind of problem. Either with the scanning, or mobile ordering, or ordering face to face….”

Other app reviewers have also complained about the app freezing at times, the clunky process of accessing deals, or it having a problem identifying the right location when they try to order on the app. 

Indeed, a friend told me she gave up on ordering on McDonald’s mobile app recently after her orders kept being sent to the wrong McDonald’s locations. She also doesn’t appreciate the fact that McDonald’s doesn’t begin to prepare for mobile orders until when customers arrive at the store to check in. “I can’t order ahead and pick up and go,” she said. “The app has potential to be really useful if it worked properly.” 

When I tried to order on the mobile app this morning, it also has initially prompted the wrong location for me to go to even when there are two other locations much closer to me. After I corrected that and “checked in” at the store I selected, my order took about five minutes to get ready. 

Meanwhile, the integration between McDonald’s mobile app and its in-store kiosk is for now pretty much limited to only when you try to redeem deals sent to your app, and that process itself requires several steps to accomplish. 

To be sure, McDonald’s is mindful it still has work to do, and where it’s falling short may also become its big opportunity. 

“’We want the customers to have great experience,’” Agmon repeated McDonald’s mandate for Dynamic Yield when he asked the company what problem it’s trying to solve. “’We are investing in digital and drive through. What can be done today?’”

Just as acquirers like Nike have credited their tech startup purchases in helping to give them a leg up on rivals, the same thing could be replicated for McDonald’s. 

Dynamic Yield, which McDonald’s reportedly bought for over $300 million in its largest purchase in two decades, has looked to have a proven track of helping brands from HelloFresh to Sephora convert more customers into buyers, increase revenue per customer or improve other performance metrics, according to case studies on its website. The startup, which said it works with more than 300 brands globally and remains an independently run unit of McDonald’s, lists other customers including Ikea and Urban Outfitters on its website. 

Take Sephora Asia for instance, the startup helped it deliver personalized email campaigns based on a customer’s skin tone, Agmon told me. “Your skin stone doesn’t change,” he said. “You are going to get different product recommendation from others. I know your purchase and browsing history….I can build a profile of you.” 

Yes, the jury is still out when it comes to the impact of the acquisition. But if done right, McDonald’s, which posted its 15thstraight quarter of global comparable sales gain in April, may well expect another jolt to its growth. 

Related on Forbes: Retailers deliver anti-tariff message to Trump

Related on Forbes: Lululemon results suggest athleisure trend has legs

Related on Forbes: Nike unveils a “game-changing innovation”

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