Could the dollar menu soon be a thing of the past? It’s possible, according to findings from market research firm Phoenix Marketing International. A new study from the firm finds that customers don’t mind paying higher prices at restaurants as long as there’s a perceived value in the item or bundled items.
After viewing quick-serve ads, participants were asked if they would visit that particular restaurant within 30 days. Ads with value messages drove 20 percent more participants to report an intent to visit than ads without value messages.
“As it turns out, whether it was the KFC ad for the Family Bucket Meal for $19.99 or a Wendy’s ad for the Right Price Right Size menu, they all did much better than our norm, which is based on a collective group of ads,” says Jen Lessard, executive vice president for Phoenix Marketing International. “It really seems that if you give [customers] quality, it doesn’t have to be a dollar-menu item. [Value messages] can do very well, and it will make the franchisees a lot happier.”
Darren Tristano, executive vice president at Technomic, says quick serves will continue to see a shift away from dollar-menu advertising in favor of promoting items that are higher in quality or are brand-oriented.
“Prices have to go up,” he says. “You can’t just keep shrinking the items down or keeping product as loss leaders for chains.”
Fortunately for brands, Lessard says, some customers no longer think the dollar menu is a bargain in any case.
“I’ve seen comments that say the dollar menu always features the smallest items or the lower-quality items,” she says. “Broadening that price range gives more flexibility to the restaurateurs to offer more items at different prices, and they’re not going to lose those value perceptions. Over time, it may even drive more traffic.”