Taco Bell’s Ronald McDonald Commercial Is Brilliant Advertising

I’m a sucker for a good commercial, particularly one with a competitive edge that indicates “I’m here to win.” The United States has largely moved away from producing those kinds of ads over the past 25 years for two reasons.

First, companies realized that starting commercialized wars with peers would lead to market share and pricing bouts of oneupsmanship in which you’re left with lower margins, and as a consequence, lower profits.

In other words, large American companies have developed a fear of the counterattack.

I’ll give a hypothetical. Let’s say that Wal-Mart lowered the price of all bread and milk products by 25%, willing to take a loss on those items to get more foot traffic through the door (and as a result, they would increase profits when customers bought products beyond the loss leaders). To kick off the campaign, Wal-Mart might launch an advertising campaign that compares the cost of Wal-Mart bread and milk products to those at Target. Initially, this could lead to higher foot traffic.

But the reason why Wal-Mart wouldn’t do this is because of the fear of the Target counterattack. Target might lower their own costs of bread and milk (perhaps by even more than Wal-Mart!) and launch their own advertising campaign to notify the public of this change.

Then what are you left? One of two things would happen. You might have an advertising wash in which both companies launched campaigns that ultimately nullified each other, wasting the advertising dollars. Or, you could have a spiral of competition in which the executive teams kept trying to one up each other, leading to higher advertising campaigns and lower prices(leading to lower shareholder profits if both sides participate aggressively with each other in this war).

The reason why the airline industry collapsed in the past decade is because you had all of these executive teams saying, “I want to gain market share against my competitor airlines”, and we’ll accomplish this through lower prices. This zeal for market share meant that the low prices weren’t prepared to handle the sharp rises in the price of gasoline over the past 15 years or the permanent structural shift in American flying habits after 9/11, and you’ve seen a flood of bankruptcies in the meantime.

If Pepsi-Cola wanted to take down Coca-Cola, they could do it by launching hundred-million advertising campaigns and lowering the price to $0.70 per bottle of soda. The problem is that they’d end up destroying themselves in the process. Shareholders would not be happy if Indra Nooyi reported an 80% decline in profitability and the slashing of the company’s dividend that has been increasing every year for decades.

Deliberate market share wars reflect the essential spirit of capitalism, but because it can lead to mutually assured destruction for both parties, you’ve seen advertising shifts towards growing the industry rather than competing for it. Big companies win when the pie gets bigger, but when you try to increase profits by taking more of the existing pie, losers get created. That’s why you don’t see as much advertising directly aimed at competitors anymore.

The second reason why companies don’t have ads as edgy anymore is because most large companies filter ads through different committees. The deathly fear at every American company is what I call “The Kentucky Fried Chicken advertising problem.” For about a seven-year stretch in the 1990s, Kentucky Fried Chicken could not run an ad that didn’t get called racist by a segment of the American commentator class. If there were no African-Americans in the ads, KFC was labelled racist for only featuring white people in the ads. And the ads that did feature African-Americans were labelled as stereotypical, and therefore, racist.

If you’re in corporate America, that is your worst nightmare. You spend money advertising because you want people to love your product and buy it. You want it to get people excited enough to get out of their house and exchange their own dollars for whatever it is that you’re selling. The last thing you want to do is alienate people and lose customers—no CEO wants to explain to their Board or shareholders that they are actually spending money to tick people off, threatening the strength of the brand in a way that might lead to lower profits.

Now, where you’re just a Twitter click or Facebook status away from having your brand harmed, companies are playing it safe more than ever, running their potential ads through committee after committee. The result is that you get watered down, boring advertising that makes you think “Really? Who thought it was a good idea to spend $400,000 to show a car driving along the edge of the mountain while fast music plays and the features are touted?” There’s nothing possibly offensive about that, which is the reason why you see those banal ads repetitively done year after year to the point of nausea.

Taco Bell, meanwhile, is firing shots at McDonalds by launching their own Ronald McDonald ad. It’s brilliant. They went across the country and found people whose real name happens to be Ronald McDonald and shows them eating and endorsing the new Taco Bell breakfast menu. It’s clever in such a biting yet gentle way that it has millions of people watching the commercial on Youtube, for heaven’s sake.

That’s the sign of success in the advertising world to me: When you’re able to reach people and spark their mind in such a way that they actually view the advertisement as an event unto itself, and seek it out on sites such as Youtube. As far as advertisements go, the Taco Bell team fired a heck of a shot in the direction of the goliath of the fast food industry.

Taco Bell conveys so many thoughts in this unassuming commercial. The ad seems to say, “We’re smart. We’re clever. We’re fun. We trust our breakfast products enough to razzle the elephant of the fast food breakfast industry. Bring it on McDonalds, we’re here to win.”

Originally posted 2014-04-03 21:42:23.

Like this general content? Join The Conservative Income Investor on Patreon for discussion of specific stocks!

3 thoughts on “Taco Bell’s Ronald McDonald Commercial Is Brilliant Advertising

  1. Falldownguy says:

    Spot on, Tim…As a native of Corbin, KY  whose grandparents knew the Colonel and Moma, I remember that controversy well.  Political correctness is killing free expression, and this will only trickle down to stifle speech, thought and ultimately innovation.  Good article.

  2. KevinDrongowski says:

    I like seeing some good old competition. McDonalds fired back with an ad showing Ronald McDonald patronizing a Chihuahua , but really the fact that they made a counter ad at all acknowledges Taco Bell as a competitor in the fast food breakfast market. I look forward to seeing how it all plays out.

  3. scchan_2009 says:

    A bit of joke: I guess why we had that recurring black guy in AFLAC ads to the extent his presence becomes part of the humour of the ad itself.

Leave a Reply