By James B. Arndorfer

Advertising Age

When a new management team took control of McDonald’s Corp. in January 2003, it inherited a marketing model as messy as a table at the end of a Happy Meals party.

The fast-food giant had become notorious for lacking focus, being out of touch with the culture, stifling ideas in bureaucracy and producing subpar work. The solution: instill the youthful “I’m lovin’ it” message-which covers everything from advertising to new products to packaging-across all channels globally. Then pit agencies against each other in jump-balls for new campaigns.

Agencies are used to hearing marketers make bold pronouncements about pursuing new directions, only to see inertia prevail. But the McDonald’s team early on left no doubt it was serious.

“I remember the day we sat in a meeting and [then-McDonald President and Chief Operating Officer Charlie Bell] said, ‘Hey, whoever doesn’t want to do this and whoever doesn’t believe in this and whoever doesn’t want to come back and show us you’ve embraced it, there’s the door,'” said Leo Burnett USA Chairman and Chief Creative Officer Cheryl Berman, who’s worked on McDonald’s for 23 years. “In the past maybe you have these meetings and you want to placate every person there and let them have their point of view and [have] advertising different in different locations.”

The plan drew skepticism. But by the most telling measurement there is-sales-the campaign (helped by operational improvements and new products) is working.

“Give McDonald’s credit,” said Bob Scarpelli, worldwide CCO at DDB Worldwide, “for having the conviction … to stick with it and say this is going to work.”

The “I’m lovin’ it” message that debuted in 2003-coined by Unterhaching, Germany-based Heye & Partner-expresses the chain’s so-called “Forever Young” positioning. Created by McDonald Executive VP and Chief Global Marketing Officer Larry Light, “Forever Young” contemporizes the fast-feeder by linking the marketer to elements of the culture such as music and sports.

The ad campaign, aimed primarily at young adults and moms, brings this concept to life through the “brand journalism” approach, in which ads tell stories about what customers love and how McDonald’s fits into their lives.

DDB’s french fries advertising, for example, shows two Chinese sisters who share everything as they grow up-until they eat the golden fries.

“Brand journalism has been about having the customer tell the story about what they like about life,” said Dean Barrett, senior VP and global marketing at McDonald’s. “The next generation of ‘I’m lovin’ it’ is to continue to lead and innovate” in touching consumers’ “passion points.”

“I’m lovin’ it” has proved elastic enough to link McDonald’s to everything from soccer to healthy lifestyles and exercise, themes that help the company respond to the anti-obesity forces that criticize its menu.

Mr. Light thinks “I’m lovin’ it” is far more than an ad campaign, however, because it covers all forms of marketing, including packaging and in-store displays, and even employee communications.

Since the program’s launch, McDonald’s’ annual employee turnover rate in the United States is down to 130 percent from 135 percent, while the industry average is 140 percent. “It’s a significant improvement and … if we get to 75 percent, we’ll be pretty happy,” Mr. Light said.

Next year McDonald’s plans to run advertising specifically directed at employee pride and employee programs. “When companies are cutting back employee benefits, we’ve increased ours,” Mr. Light said. “We need to figure out how to make ‘McJob’ a badge of pride again.”

The new marketing approach puts a premium on agencies digging up actionable consumer insights. McDonald’s spends “more time with our agencies looking for customer insights, what do they enjoy in life and how does McDonald’s fit in as part of that,” Mr. Barrett said.

But the strategy comes with its own challenges. While same-store sales are growing, McDonald’s has set aggressive future targets. That means it must keep finding ways to move the idea forward.

“The innovation of the campaign is to consistently and constantly look for those new things, those new opportunities and ways to connect to the customers through what they’re thinking and where they’re going in life and how we remain relevant to them from a cultural standpoint,” Mr. Barrett said. “That’s a constant challenge.”

Agency resources are also being challenged. McDonald’s allots work to its lead agency, DDB Chicago, and Burnett.

But in some cases it holds jump-balls, which can be draining and distract from work an agency already is doing for McDonald’s. In addition, Mr. Light has said he plans to encourage agencies to share ideas in progress with other shops, which could create friction among agencies.

“Every agency has a certain sense of competitiveness and a certain sense of we can do this better than anyone else can do it,” said Burnett’s Ms. Berman. “The jump-balls keep you on your toes. I don’t think you can have so many of them that everything’s up for grabs, but they keep you from becoming complacent.”

Previously, McDonald’s marketing efforts were undermined by different regions running ads with different looks. “I’m lovin’ it” imposes constraints so the company’s message remains consistent. For instance, the line “I’m lovin’ it” has to be used.

But McDonald’s allows agencies flexibility in expressing ideas, the so-called “Freedom Within a Framework.”

A standout example was DDB’s “Lincoln fry” effort. Assigned to create a Super Bowl spot, DDB went further and created blogs touting the fictitious fry and auctioned it off, giving the effort a life well beyond the sports event.

And as McDonald’s seeks to contemporize itself, it’s more open to these sorts of ideas than in the past.

As DDB Senior VP Paul Tilley, the agency’s top creative on McDonald’s, said in a recent speech: “McDonald’s consciously is trying to do things that are unexpected.”

Kate MacArthur contributed to this report.