Leveraging Today’s Value Mindset – M&C Report

April 2, 2012

Leveraging Today's Value Mindset

Leveraging Today’s Value Mindset

Consumers are more reliant on value than ever before, and the definition of value has grown beyond simply price to include many elements of the dining occasion.

Each consumer’s interpretation of his or her personal economic situation is rarely static, so how they choose to spend hard-earned discretionary dollars is always changing as well. Unfortunately, one category of discretionary expenditures that can quickly be adjusted is restaurant use. In uncertain times, people modify what they spend during each visit or even reduce the number of restaurant visits. Yet at the same time, they still crave restaurant food and the social experience of dining out.

Given this consumer mindset, how do concepts formulate a winning business strategy?

Defining the New Value Equation
Consumers indicate that individual restaurant success depends on the ability to create, communicate and deliver value. However, the definition of value is not simple and straightforward. The precise meaning varies not only from person to person, but even within a single individual, depending on the specific meal occasion and what he or she expects during that visit.

In a general way, value can be broken down to an equation: value = (menu + experience) / price.

However, consumers weigh menu, experience and price attributes in different ways. For example, some demographic differences appear when looking at the importance levels that consumers give restaurant touchpoints or attributes.

Technomic’s Consumer Restaurant Brand Metrics—an ongoing program that gathers consumer feedback on 55 different attributes that capture a restaurant experience, from the quality of the food to the reputation of the brand—represents 1,000 nationally representative consumers and more than 25,000 restaurant visits.

We selected 10 attributes that represent the key elements of the value equation: price, menu and experience, and analyzed consumers’ importance ratings by age and income. The attributes that rose to the top in almost every instance were food taste/flavor, pleasant service and good value through low prices.

However, different age groups do not rate these attributes equally. While each cohort rates food taste as very important (or a top two box on a scale of 1 to 5), almost all of those age 55 and older (97%) say it is important, while about 95% of those 35–54 and 90% of those 18–34 say the same. Likewise, the data indicates the older the consumer, the more apt he or she is to say that pleasant service is important.
Those in different income groups also do not rate the top attributes equally. Again, each group rates food taste, pleasant service and price value as the most important. They rank them in that order, too, except those who earn less than $25,000, who rank good value through low prices before pleasant service.

Consumers with a household income between $50,000 and $99,999 rate the importance of each of these attributes higher than those in other income levels, followed closely by those in the $25,000–$49,999 group. If a concept is courting these customers, it must be sure to execute well on all of these attributes.

Value Tactics
Many restaurants communicate value price-point perceptions, simply aiming to show that their price is better than their competitors’. Examples include value menus, such as the Dollar Menu at McDonald’s and Taco Bell’s overall pricing strategy, and daily specials such as Hooters’ Wingsday Wednesday, when the $8.99 platter of its signature item is $5.99. Similarly, offering large portions, as they do at The Cheesecake Factory and Maggiano’s Little Italy, can communicate value. All-you-can-eat options have a similar appeal.

Other ways to indicate that a restaurant or menu item is “worth it” is to offer a unique flavor (as at fast-casual Mexican chain La Salsa, whose limited-time Green Chile Chicken Burrito highlights an ingredient that adds an authentic Southwestern appeal), a sense of indulgence (such as Kenny’s Burger Joint’s Naughty Mommy, with Stoli Strawberry, Navan vanilla cognac, amaretto, cheesecake, strawberry and vanilla ice cream) or an element that is considered premium (for instance, those that include high-end brands such as Ghirardelli or Crown Royal or people with a reputation for excellence such as Wolfgang Puck).

Consumers are looking to do more in less time, and their value definition is often grounded in minutes and even seconds. At some restaurants, including In-N-Out and Chipotle units, employees use hand-held technology to take orders. Customers then pay and receive their orders when they reach the window or counter. At Cracker Barrel, a prominent chalk board displays menu items that can be prepared and served in just a few minutes. Likewise, restaurants are adding value by offering portable menu items with sound packaging, separate registers and grab-and-go cases, and online and mobile ordering.

Restaurants that focus on the overall experience create value by showing customers they have nothing to worry about over the course of their dining occasion. Marketing messages tend to focus on how the guest will feel, and examples of food, hospitality and ambiance are mixed in to reinforce that commitment. A good example is Bonefish Grill, whose marketing features upscale touchpoints like a chef in his white jacket presenting delicious-looking food to cozy couples and groups of friends.

Similarly, restaurants ranging from family-style eatery Egg & I to high-end steakhouse Capitol Grille have positioned themselves to offer businesses and community groups a quiet and private space for meetings.

Recommended Roadmap
Restaurants use literally hundreds of interesting value strategies and tactics. However, not every method will be right for every operation. With that in mind, we propose these steps as a roadmap to determining which strategies are worth trying.

Analyze menu pricing and portion sizes against competitors. Keep in mind that the competition does not simply include, say, those that serve the same type of menu. McDonald’s competition includes Burger King and Wendy’s, of course, but it might also look at Subway, Starbucks and even the local convenience store.

Know your target market. As the Consumer Restaurant Brand Metrics data above reveal, different customers rank some attributes higher than others. Beyond age and income, gender also plays a role in restaurant attribute priorities, as do region, population density, ethnic background, whether there are kids involved—the list goes on.

Ask your current customers what they want. This can take any of several forms, including quantitative surveys to determine price flexibility and asking how they use brand and the competition; facilitated focus groups to gain qualitative insights; secondary research from a reputable firm; outreach to email contacts and social media networks; and simply watching and talking to guests in the restaurant.

Identify opportunities to provide value. Use the examples in this article and pay attention to how value is communicated in other concepts to both analyze the competition and spark new ideas. Market your efforts using the attributes and brand-use drivers that your customers find important.

Key Takeaway
Studying your competition, target audience and current customers will enable you to broaden your view of “value” and what it means to consumers. Your company can then address whether it should follow the pack and develop a value message similar to what the majority of operators are using or aim to create a differentiated message using some value strategies that are used less often. The execution may be more challenging than a tried-and-true method, but the results may be increased customer traffic and long-term bottom-line improvement.

Darren Tristano is Executive Vice President of Technomic Inc., a Chicago-based foodservice consultancy and research firm. Since 1993, he has led the development of Technomic’s Information Services division and directed multiple aspects of the firm’s operations. For more information, visit http://www.technomic.com.

This article came from a print version of M&C Report

Burger King Does Their Homework, Gives Customers What They Want?

April 2, 2012

Burger King launches 10 new menu items in an effort to regain share and increase unit sales. The menu items include a new home-style snack wrap, salads, smoothies and frappe coffees. 

BK has done their homework and the conclusion is:

  • Contemporize restaurants – Update and remodel tired, aging stores
  • Improve packaging – use more contemporary cardboard cartons vs. wrappers
  • Change server uniforms to be more modern
  • Provide customers with the same choices they enjoy at McDonalds

Although these changes may not lead to a rapid turnaround for the burger giant, it certainly is a giant step in the right direction. 

After all, it has often been said that “sometimes the best ideas are borrowed” and “imitation is the greatest form of flattery”. 

We’ll have to wait and see if  this “me-too strategy” works…

Burger King New Menu Items

Restaurants Find Big Profits in Small Plates

April 2, 2012

Restaurants Find Big Profits in Small Plates

Restaurants Find Big Profits in Small Plates

By: Christina Cheddar Berk
News Editor

Americans are grazing on the go, and that’s been good news for restaurants, according to market researcher Technomic.

“Recent consumer research indicates that snacking is becoming a larger part of consumers’ daily lives,” said Darren Tristano, executive vice president at Technomic.

The firm recently examined the snack preferences, attitudes and purchasing behavior of more than 1,500 consumers, and found consumers are snacking significantly more than they were just two years ago.

Almost half — some 48 percent — said they’re now snacking at least twice a day. In 2010, only 25 percent of consumers said they were snacking that frequently.

And a greater portion, about 22 percent of those snacks, is purchased in restaurants, up from 17 percent in 2010.

Certainly consumers have more snacking choices at restaurants than they used to have. Fast-food chains such as McDonald’s [MCD 95.67 -0.13 (-0.14%) ] and Yum Brands’ [YUM 70.61 -0.11 (-0.16%) ] KFC offer snack-sized sandwiches, and restaurants such as Cheesecake Factory [CAKE 29.885 -0.295 (-0.98%) ] and California Pizza Kitchen are offering “small plates” and snacks on their menus.

At California Pizza Kitchen, for example, customers can order off the “Small Cravings” menu, which has items ranging from small servings of salad to more indulgent treats such as the 455-calorie Spicy Chicken Tinga Quesadilla.

Tristano attributed the trend to pressure from nutritional disclosure legislation, which has prompted the foodservice industry to reduce calorie counts in meals.

“As a result, Americans are more inclined to ‘graze’ throughout the day, seeking snacks that provide fuel between traditional meal parts,” he said.

More than a third of consumers have also broadened their definition of what a snack is to include more types of foods, beverages, and restaurant fare.

Restaurant chains also are trying harder to promote inexpensive snack items and bar plates to cater to younger customers, who tend to visit more often for late-night snacks.

This may be why at some restaurants, the snack menus are available only at specific times. Uno Chicago Grill, for example, offers a “Snack Hours Menu” from 4 p.m. to 7 p.m. and again after 10 p.m. This menu includes traditional bar food, such as buffalo chicken wings, as well as mini sandwiches such as hamburger and lobster sliders.

According to Technomic, small sandwiches are common on snack menus and have evolved from a simple snack to a downsized gourmet version of signature full-sized versions.

But convenience may be a key element of the snack craze. Sixty-two percent of consumers reported they purchased the snack at a restaurant on impulse.

View the full article at CNBC.com