As the economy shows signs, however slight, of easing its grip, saving money remains on consumers’ minds. Considering the economic climate, we asked our analysts around the globe for their thoughts on must-watch trends for Quick-Service restaurants (QSRs) in 2023. The topic that came out on top? Value.
Here’s what QSR brands, franchisors and franchisees need to know about value as we head into a new year, according to Revenue Management Solutions (RMS) analysts.
Understand, then improve value perception
Before you can improve value, it’s key to understand how guests view it. In the earlier part of 2022, diners said that value meant service and convenience. Today, value is more focused on price. What does this mean for operators? Customer perception will shift over time, including even how they define value.
Action: Start planning your 2023 marketing calendar now. Include relevant value messaging, and continue that drumbeat throughout the year. While the message should focus on value, the content and strategy can (and probably should) vary as your offers change and customer perception shifts.
Ensure value deals and bundles are relevant
With restaurant prices increasing (currently 8.5% for Food Away From Home [FAFH]), RMS analysts are seeing customers show early signs of check management or trade-down. For the time being, the good news is that diners have not yet begun significant trade-out by reducing their frequency. Instead, guests are managing their check by skipping some of the “extras” on the menu, such as appetizers, desserts and beverages.
In RMS’ Q3 report, among those spending less at restaurants, 18% said they are no longer ordering dessert, 16% are no longer ordering appetizers, and 12% are no longer ordering beverages.
Action: Consider promoting deals that are good check builders. Offers such as “Add a Frozen Lemonade for $2 with the purchase of an entrée” are one example. Positioned correctly, offers like these can appeal to guests’ desire to “treat” themselves while keeping an eye on discretionary spend.
Another possibility is to rethink the menu: Instead of offering just the main component of a meal, advertise price-pointed bundles to drive customers to buy bundles or family meals. In our Q2 report, more than 50% of households with three or more people reported ordering family meals at least once every two weeks. When asked why, 67% mentioned getting better value, pricing and deals.
Coupons are also effective. In our recent deep dive into coupons and promotions, 77% of respondents said they preferred coupons for family meals, and 70% said they were keen to use coupons that bundle items.
Offer innovation and price accordingly
As RMS sees customers steadily move away from $1 or very low price point deals, our analysts encourage brands to use POS data to reconfigure offerings in creative ways. When they do, innovation allows a slightly higher price point.
Action: Start the process early by developing new and innovative items at higher-value price points. Do you offer $1 and $2 items? Think instead of offering potential items priced at $3.
In the past, our analysts have recommended that brands gradually reduce the number of value items at the lower price point. Taking this approach helps preserve margin by managing that gap over time between value prices and the rest of the menu board.
Offer value with personalized deals
It’s difficult to say what the economy will look like in 2023, but it’s best to be proactive and put a plan in place to address any potential traffic shortfalls. The most effective way to do that is by leveraging your existing customer database, whether through a loyalty program or custom app — both offer a direct line of communication with your customers.
Action: Use technology to offer deals to keep your existing customers coming back. If one of your loyal customers hasn’t shown up in a few months, do you have a mechanism in place that would send a customized offer to entice them to come back?
Because they allow personalization, apps and loyalty programs can be especially helpful when reaching out across generations. Depending on age and household type, customers view and use discounts differently. For example, single-member households are more loyal than family households. The latter will switch or even take the time to find restaurants with the best deal. That said, be sure to group existing customers into segments and offer them relevant deals based on past purchase patterns and viewpoints.
For now, value is here to stay. Make sure your brand delivers it.
If you are interested in innovative ways to demonstrate value that will keep guests coming through your doors and to your drive-thru windows, RMS can help strengthen your restaurant’s pricing, menu and brand strategy. Get in touch with our experts, and be sure to subscribe to our mailing list to get industry trends and reports delivered straight to your inbox.