Discounts Have Restaurants Eating Own Lunch?
24. Jun, 2009 
6 Comments
Everyone knows that restaurants have been engaging in price wars and deep discounting to maintain traffic and revenue. Over the past few weeks, marketing pundits have been asking if the discounts are working, or if they will work in the long term. Today, the NY Times weighs in: link
Previously on The Hive:
Fast Food Strategy Free or Practically Free?
Can They Really Make Money Off the Dollar Menu?
To me this is a discussion about value. However just because a product is cheap does not mean it is high value, especially when we are talking about food. I would rather have a $6 sandwich from Panera than a $1 cheeseburger from a QSR any day. Why? Well for starters, I am getting better nutritional bang for my buck with the sandwich. The burger fills me up but at what cost, my own personal health and well being?
These casual restaurants should focus on quality, nutrient dense foods and change the paradigm rather than tear each other to pieces and hurt the entire industry as a result. Considering 2/3 of us are overweight or obese and the number of people with diabetes in this country is staggering and growing, making the argument that it is worth a few extra bucks to buy a quality, nutritious meal rather than a cheap, unhealthy one is not too difficult, the logic is there.
Some thoughts:
Create another day part to drive traffic–afternoon or late evening.
Feature a unique serving method that draws attention to the item, ie, finish/garnish tableside.
Train and incent waitstaff to suggest items.
Provide servers with “Be my guest” coupons for return visits.
For years McDonald’s went from one promotion to next. Each month they had a movie tie-in or a deal of some kind. In fact, the toy premiums they gave away made them one of the largest retailers of toys in the country. All in an effort to make sure that same store sales were higher than the year before. It was like marketing crack. The more they did it, the more they needed it.
The term Super-Size started out as Dino-Size as part of the original Jurassic Park Movie tie-in. The giant sized drinks and fries were so popular McDonald’s kept them around long after the movie was gone.
At the height of the Beenie Baby craze, McDonald’s launched a Teenie Beenie Baby promotion. Customers would come in, order a Happy Meal, grab the toy and throw away the food!
One of the biggest promotions each year was the Monopoly Sweepstakes. Millions of dollars in prizes were awarded to customers. Houses, cars, cash, cruises, free food, you name it, it was in the game.
Then Simon Marketing, the company in charge of managing the sweepstakes, was caught cheating. They had fixed the game so they could award the big prizes to their employees, friends and relatives. McDonald’s cancelled the sweepstakes and had to apologize to their customers. To make restitution, they devised a new game to award the prizes fairly.
They faced a crossroads. Promotions were off the table for the time being. They had to get back to basics. They faced slower traffic and lower sales. They had to ask themselves if they were in the toy business or the hamburger business.
In the meantime, American tastes were changing. Americans were looking for healthier choices even at fast food restaurants. So McDonald’s expanded their menu with healthier menu items like cool salads and not-so-healthy items like the McGriddle. They even did away with Super Sized items after a documentary about a man who eats McDonald’s every day for a month showed how bad an idea Super Sizing really is. Eventually same-store comps got better.
Soon customers started coming into the stores for food instead of Beenie Babies. Best of all McDonald’s had broken the vicious cycle of the “deal of the month” club.
People underestimate the power of great execution.
Without it, even a brilliant strategy won’t work. Passion rarely comes out in a strategy.
Big ideas don’t put food on the table without the grower, the harvester, the miller, the baker, the trucker, the salesman, the distributor, the cook and the server.
The quote from the study below doesn’t relate completely to the menu wars, however it refutes that when you move something down to the $1 menu (or discount pricing) – makes it more difficult for people find value in your product when you attempt to remove the discount OR when you take it off the value menu. So if you want to move a product to the $1 menau (or discount it), you MUST also “take something away” i.e. When Burger King wanted to get the Whopper BRAND onto the dollar-menu, they took aways “size” called it the The whopper JR, so that it is commiserate with the lower-price
The Dollars & Consumer Sense 2009 study, released today, finds that
consumers often have a negative reaction when they see the price
slashed for their favorite product or service.
In fact, 70 percent of respondents to the Yankelovich poll said such
cuts probably mean the brand was overpriced in the first place. And,
62 percent said they assumed that the product was old and they were
just trying to get rid of it.