New product ideas are a staple of our culture. Just take a look around you—how many billboards or television commercials can you count with new products or services? So, where do those ideas come from? If you’re a company like McDonald’s, the ideas don’t come out of thin air. Instead, they’re the result of careful monitoring of consumer preferences, trends, and tastes.
McDonald’s menu is a good example of how consumer preferences have affected change in food offerings. What used to be a fairly limited lunch and dinner menu consisting of burgers, shakes, and fries has now become incredibly diverse. The Big Mac came along in 1968, and Happy Meals were introduced in 1979. Break-fast now accounts for nearly 30% of business in the United States, and chicken offerings comprise 30% of menu choices. Healthy offerings such as apple dippers, milk jugs, and fruit and yogurt parfaits are huge sellers. The company now rolls out at least three new products a year. Wade Thomas, VP U.S. Menu Management, leads the team behind most of today’s menu options. He meets regularly with Chef Dan, the company’s executive chef, to give the chef’s team some idea anchor points with which to play.
Discussion Questions:
1. During the past year, McDonald’s introduced a new dessert product into its European market area. This product had already passed all the internal hurdles described in this case, including the focus group analysis and the operations analysis. The next step was to see how well the product would be received in the marketplace. In particular, McDonald’s managers are interested in estimating the mean number of orders for this dessert per 1,000 customer transactions. A random sample of 142 stores throughout Europe was selected. Store managers tracked the number of dessert orders per 1,000 transactions during a two-week trial period. These sample data are in the data file called McDonald’s New Product Introduction. Based on these sample data, construct and interpret a 95% confidence interval estimate for mean number of dessert orders per 1,000 orders.
2. Referring to question 1, suppose that Wade Thomas and his group are not happy with the margin of error associated with the confidence interval estimate and want the margin of error to be no greater than ± 3 dessert orders per 1,000 customer orders. To meet this objective, how many more stores should be included in the sample? Alternatively, if the managers don’t wish to increase the sample size, what other option is available to reduce the margin of error? Discuss the pros and cons of both approaches.