Industry News | August 12, 2010

Convincing Customers Your Food Is Worth It

The recession left many quick-service operators scrambling to find ways to draw consumers. For many, slashing prices and offering discounts seemed the sensible solution, providing consumers with a penny-pinching means to dining out.

But now that the economy is slowly climbing back to normal, operators are left to figure out what to do with their prices. At QSR’s Dine America conference, September 12–14 in Atlanta, a panel of experts will share how operators can start to shake the discounting blues—without sacrificing their customer base.

The panel includes Leslie Kerr, president and founder of the restaurant pricing advisory firm Intellaprice LLC; Matt Andrew, founder and chief pizza officer of Atlanta’s Uncle Maddio’s Pizza Joint; and Denise Lee Yohn, brand consultant and QSR contributing columnist.

Kerr says that pricing in a post-recession world will need to be a careful process. Operators, she says, will need to figure out how their prices fit into their entire marketing mix.

“That involves making sure your process is in place to optimize pricing that will attract customers, that will retain them, that also isn’t just about pricing—that promotions fit in with what resonates with customers,” she says. “Marketing creativity is still a driver in building your brand.”

The marketing strategy will still have to focus on the value of the restaurant, Kerr says, but not necessarily value that involves a low price point. Now that operators will start to retreat from their recession discounts, they’ll need to show consumers that their product’s value is not intrinsically connected to price.

“Maybe value is not so much because you have a two-for deal, but it’s because hey, here’s this great product that you love that is well-prepared and delicious and healthy,” she says. “We should remind our guests value isn’t just a function of price.”

Of course, Kerr says, retreating from the deep discounts of the recession leaves operators with one big problem: recession-era fast food customers were conditioned to expect the lower prices of promotions and discounts.

Bumping prices back up to prerecession levels or higher, she says, might be a dangerous move.

“I would like to think that operators are mindful that we’ve gotten customers used to these deals, and there could be a little bit of a backlash if the price hikes are too quick and too high,” Kerr says.

“Consumers are going to return, but there’s a portion of customers who might start to think, ‘I like the old way. This is something I got used to, and I’m now more budget-conscious.’ That’s why I think the attention will be taken off of price, off of the deals, and it will be much more about the product and the value.”

Kerr says that operators will still be able to increase their prices now that the worst of the economic woes are over, but that getting back to a comfortable price point will take baby steps.

“It’s not making drastic increases, just like you shouldn’t have taken drastic decreases,” she says.

“Once you do start to back off of the discounts, it’s important to do that in a way that’s palatable to customers. If it’s a $3 price point one day and then it’s all of a sudden $4, that’s not palatable to a consumer. But if it goes up to $3.29, that’s a little bit easier to take.”

If you'd like to learn more about how to structure your prices in a post-recession world, click here to request your invitation to Dine America.

By Sam Oches

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