Discounted prices don’t have to mean discounted brand

Discounted prices don’t have to mean discounted brand

If there is one thing certain about the state of the consumer in the restaurant industry, it’s uncertainty.

Depending on the day, or which new poll comes out, there is still a fair amount of uncertainty being dealt with inside the restaurant industry. For example, in two separate issues of Nation’s Restaurant News dated just two weeks apart, one article talks about people committed to dining out more (Consumers Hungry for Restaurants – July 5) while another deals with consumers still being reluctant to dine out (Consumers Still Cutting Back – July 21).

Consumers still cutting back

Despite what some see as gradual improvements in the U.S. economy, consumers say they are still cutting back on purchases, including early morning coffee and dining out, a new Harris Poll survey shows.

Read more: Consumer still cutting back

Consumers hungry for restaurants

About 25 percent of the 4,600 respondents to a Market Force poll indicated that they plan to eat at restaurants more in the next three months than they did during the previous three months, compared with only 5 percent of consumers surveyed in December 2009.

This inconsistency is the reason your brand needs consistency—in the delivery of the overall experience. Because while discounting or “coupon-ing” your brand is one way to drive short-term sales, it could be one of the of surest ways to devalue your brand in the long-term—not in the eyes of Wall Street or your accountant, but in the eyes of your consumer. Because if your consumer starts to believe you’re cheap, versus value-driven, you will never regain their true loyalty.

Cutting costs, not corners

If not handled properly, the lift of short-term price cuts destroys long-term brand value.

In 2004, Ruby Tuesday and a host of other brands introduced discounted menu campaigns. But, by focusing on discounting the food, they also discounted their brands, creating less of a value proposition in the minds of their customers. Consequently, most of the efforts created short-term lift, but failed to generate any long-term results.

Conversely, in 2007, T.G.I. Friday’s developed their “Right Portion, Right Price” offerings that focussed on serving smaller portions that resulted in healthy payoffs. Their effort succeeded because they created a value proposition for the customer—“I don’t feel like I am ‘cheap’ because I am paying for what I am getting.” With their success, and others following suit, smaller portions were named among the top 10 food trends in 2009 by the National Restaurant Association’s Tableservice Restaurant Trends Report.

T.G.I. Friday’s

In 2007 Friday’s introduced Right Portion, Right Price menu that focused on serving smaller portions for health payoffs.
TV ads focused on smaller portions and prices so consumers could dine in any day they wanted, keeping the Friday’s brand relevant to the promo.
They created 10 dishes where customers got 1/3 less food and paid 30 percent of the price.
It was such a big hit that it became a permanent fixture on their menu.

Cheesecake Factory

In 2009 Cheesecake Factory introduced their Small Plates & Snacks menu consisting of 16 dishes priced from $3.95 to $6.95. Designed as a “pre-appetizer” or could be combined with other dishes to make a meal.
Promoted as a low-risk way for guests to try new dishes.

Carrabba's

Launched their Less is Amore menu and mini desserts in April of 2010.
Campaign tied into Italy and how meals are savored there. They wanted customers to get the full experience of authentic Italian meals but still be able to eat lighter.
Mini desserts also offered since customers might want more after the Less is Amore dish.

Variety and innovation. The new recipe for success.

According to the American Culinary Foundation, people are looking to offset dents in their budgets. Smaller plates create a more exciting dining experience—more affordable options and the chance to explore more culinary options. This can result in greater profits for restaurants since consumers often order more than one item. Sharing can be promoted so consumers band together, get a variety of food and of course get more affordable prices. Women are often targeted for all of this and as a means of invoking conversation and intimacy during a dining experience.

Houlihan’s

In early 2010, they introduced their Small Plates menu, including “big small plates” and they were promoted on their menu as “appetizers for serious sharing.”
30+ small plates priced between $2 and $10.
Meant customers didn’t have to commit to one big plate; they were encouraged to mix and match, and share.
Menu also indicates which items are vegetarian and which are gluten-free, which goes along with current consumer dining trends.

California Pizza Kitchen

This past year, California Pizza Kitchen introduced its Small Cravings menu in an attempt to drive revenue. Menu features seven tapas-style plates of food.
Priced between around $4 and $6.50, which is cheaper than appetizers which are priced from $7 to $11. Items promoted as being shared or acting as a small meal for one person.
Resonates with guests just looking for a snack or those who want to order more and share.
Also have a new Wine Cravings program in which they serve half-glasses of wine for consumers who want to drink less/spend less. Prices vary but some are as low as $4.75.
As an added bonus, this summer there was an online coupon for a free Small Cravings dish with every $20 purchase. (promoted via Facebook, if you “Like” them).
In April of 2010 it was said that revenue was improving slightly.

Will discounting continue?

Again, depending on which poll you read, or day you read it on, it’s debatable.

According to AlixPartners (business strategy firm), diners are expected to spend around $11.60 per meal at restaurants over the next year. And this is down 21 percent from pre-recession 2008.
Some restaurants like Chili’s are introducing new menu items rather than just focusing on discounting existing ones. They have a two entrees, shared appetizer and dessert for $20 option.

Whatever you do, don’t discount the experience

While customers are expecting you to save them money, if they so choose, they are not expecting to find places where you cut corners to make up for the savings. Delivering on a complete experience is now more important than ever.

“One of the most interesting findings from this survey was that a ‘Very Satisfied’ customer—one that gives a five out of a five rating [to a restaurant]—is three times more likely to recommend a restaurant, both online and offline, to a friend than a merely ‘satisfied’ customer—a four out of five [rating],” said Janet Eden-Harris, chief marketing officer for Boulder, Colo.-based Market Force. “Because of the long-term effects that recommendations have on a restaurant’s reputation, a one-point disparity in a rating scale can spell the difference between real sales growth and a stagnant business.”

Cutting costs, not corners

When advertising discounts, not only are you having to pay for the media to get the message out, your food costs also should be added into the equation. While the two, marketing and food costs, don’t show up in your CFO’s office the same way, they both contribute to the bottom line. But only one, marketing, can contribute in a positive way through properly selling the “brand” while discounts only drag down profits.

Creating a plan

It’s important to focus on the value of your food, the quality of your experience and the quality of your staff rather than simply cutting prices.

Introduce smaller portions and focus on health, increase the number of free items that come with each meal (include two small sides rather than just one large one), or try including dessert.
Promote via social media to complement your integrated marketing plan.
Create a loyalty/rewards program to build brand awareness and customer loyalty. This way the brand isn’t discounted but coupons/offers can still be delivered as a reward, versus an incentive.
If coupons are being offered, they should be enhancing and not discounting the brand.

Push has extensive experience working with developing, growing and mature brands in the restaurant industry. If you would like to see examples of work done for a variety of our clients, visit www.pushhere.com.

To talk to Push directly, please contact John Ludwig, CEO, at 407-841-2299 or at jludwig@pushhere.com.

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