• by Lisa Bertagnoli , January 2, 2007

Sappy ads, burgers and fries, yellow-and-red stores, and a clown: That's so last-century McDonald's.

The 21st-century McDonald's engages in target marketing, and has dipped its toe into digital media. It's expanding its menu to reach new customers, and redesigning its 13,600 domestic restaurants with earth tones, comfortable furniture, and WiFi.

Unlike its rivals, McDonald's hasn't launched a best-selling Xbox game, signed a major hip-hop mogul to be its spokesman, or added headline-grabbing, super-caloric items to its menu. And it trails its competitors in solving one of the restaurant industry's biggest conundrums: removing trans fats from foods.

Apparently, all that doesn't matter. McDonald's sophisticated, wide-reaching marketing efforts encompass both new media and old. On the new side: Digital efforts, such as a Filet-O-Fish "webisode" posted on YouTube and an online version of its successful Monopoly promotion. On the old side: Sponsorship of the 2008 Olympic Games in Beijing, and the continuation of "I'm Lovin' It," its long-running advertising campaign.

Customers are responding with their feet: The chain has posted 44 months of consecutive same-store sales increases. And Wall Street is lovin' it: In late December, McDonald's stock price hit a seven-year high.

"They are one of the most effective marketers across the board," says Ron Paul, president of Technomic, a Chicago-based restaurant research firm.

"There's an awful lot going on" with McDonald's marketing, Paul adds. "I don't think any of us knows all that is going on."

The marketing initiatives have a single goal: reaching customers, whether they're 40-something moms or 20-something men. "It's all about customer relevancy," says Mary Dillon, executive vice president and global chief marketing officer at Oak Brook, Ill.-based McDonald's.

"I think we really dig deep for consumer insights, and deliver with innovation," Dillon says.

What McDonald's really delivers is a menu that's growing beyond its burgers-and-fries basics, but logically and rationally. (McDonald's followers will remember its now-abandoned test of pizza; there's no similar frippery these days.) "Customers' tastes and what they eat are changing," says Wendy Cook, vice president of menu management at McDonald's.

Hits for 2006 included a chicken snack wrap and gourmet coffee; for 2007, the roll is likely to continue, thanks to a multitude of products in test, among them Angus burgers, all-day breakfast service, a dollar breakfast menu, and deli sandwiches.

As the menu changes, it brings more--and different--customers to McDonald's. One example: Chicken. Five years ago, McDonald's launched a strategy to slowly add more chicken items to the menu. First up: Crispy and grilled chicken salads, the debut of which sparked the first of the 44 months of consecutive comp-store increases. McDonald's changed the McNuggets recipe to all-white meat, added chicken strips, then premium chicken sandwiches in 2005, and the snack wrap in August of 2006.

That chicken--and the female-friendly ads that tout it--pull in incremental sales, namely among "women that are moms and young adults, and kids," Cook says. Hence the redesign, which trades McDonald's signature red-and-yellow scheme for earth tones, soft furniture, and flat-screen TVs. "We are offering our customers the kind of menu experience that they might expect to get at a sit-down restaurant, but at McDonald's convenience and value," Cook says. So far, 6,000 restaurants have been remodeled, and 8,000 offer WiFi to customers.

McDonald's is hardly ignoring young men. A "Pirates of the Caribbean" game featured peel-off stickers that revealed either a prize or a code. Customers who received a code could go to the Internet and look it up to see whether they'd won a prize. Cook describes the gambit as "a tiny thing in the promotion that makes it more relevant to young adults."

Of course, McDonald's marketing reach extends to customers outside the U.S. Last year, the company announced a Global Casting Call, a worldwide search for McDonald's customers to grace its packaging. The casting-call Web site received 13 million visits, and 13,000 McDonald's customers submitted photos and 100-word essays that described themselves "lovin' it." Twenty-five customers were chosen, and their pictures will be on McDonald's packaging in the spring. Thanks to the Global Casting Call's success, McDonald's plans to expand its digital presence.

The chain has hired AKQA, a San Francisco digital agency that has worked with Nike and Microsoft, to help with its digital strategy. The Internet "is a fun, engaging way to market," Dillon says. McDonald's next big global venture: Beijing in 2008. McDonald's hopes to have 1,000 restaurants open in China by then, and will get involved in the Olympics by sponsoring programs, in conjunction with the International Olympic Committee, that bring kids and athletes together. (The company sponsored a similar effort, called the Player Escort Program, during the 2006 World Cup.)

"All eyes will be on China for the Olympics," Dillon says. "It's a huge opportunity for us."