America, You Have a Math Problem
Overestimating the intelligence of the public usually leads to trouble
Think of how stupid the average person is and realize half of them are stupider than that. — George Carlin, American comedian
The burger wars are a real thing, and you can witness this fight amongst fast-food giants like McDonald’s, Wendy’s, Burger King, Jack in the Box, and A&W play out in real-time as they compete for a share of the consumer wallet and waistline.
The battle was especially heated in the early 1980s as the chains competed for market share against industry giant McDonald’s. McDonald’s had a clear winner in their Quarter Pounder. First introduced in 1971, the burger had a pre-cooked weight of 1/4 pound and targeted customers who wanted a higher meat-to-bun ratio. To take the burger giant head-on, rival chain A&W introduced their Third Pound Burger. Launched with much fanfare and generous advertising dollars, A&W positioned the hamburger as more meat for a lower price than McDonald’s Quarter Pounder. Despite having extra meat, a lower price, and (in taste tests) a preferred flavour, A&W’s lavish marketing efforts could never get the fast-food public to embrace the Third Pound Burger in sufficient numbers to dethrone the Quarter Pounder; it was a flop. It wasn’t until the company hired market research firm Yankelovich Skelly & White to conduct consumer focus groups that they understood why.
In his book Threshold Resistance, A&W owner Alfred Taubman recalls what happened next.
“Well, it turned out that customers preferred the taste of our fresh beef over traditional fast-food hockey pucks. Hands down, we had a better product. But there was a serious problem. More than half of the participants in the Yankelovich focus groups questioned the price of our burger. “Why,” they asked, “should we pay the same amount for a third of a pound of meat as we do for a quarter-pound of meat at McDonald’s? You’re overcharging us.” Honestly. People thought a third of a pound was less than a quarter of a pound. After all, three is less than four!”
The inability to correctly calculate fractions led people to make the wrong choice, resulting in the downfall of a superior value product.
Insight and Application:
There is reality, and then there is customer perception. And inevitably, customer perception always has the dominant hand. While A&W had the facts on their side, they did not recognize the significance of their customers’ math skills or their perception of value. A&W’s marketing campaign assumed that the increased bun-to-meat ratio and price reduction would be enough to pull customers away from McDonald’s Quarter Pounder. But A&W leadership failed to acknowledge that the customers were not able to accurately calculate the size of the burgers or the resulting value.
This story illustrates the significance of market research, customer feedback, and a proper understanding of why customers behave the way they do. By carrying out consumer focus groups, A&W was able to identify the problem and modify their strategy appropriately; but by then it was too late. The Third Pound Burger was pulled off the menu, but did eventually get re-introduced as the iconic Papa Burger.
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