Everyone Loves a Deal

March 11, 2010

© 2010 L. Kerr

Free this, all you can eat that. 2 for $20; 15 under $15; starter, entrée and dessert for $12.99. Small cravings. Small plates and snacks. $1 coffees; $1.00 menu;  $5 lunch. And the list goes on – you can’t turn around without reading about specials at restaurants everywhere. It’s deal madness.

Don’t you love it?

And I don’t just mean customers – restaurants have to love them as well. They don’t have a choice.

For cost-conscious customers, as times stay tough and cost cutting is a must, a simple, casual meal out moves down on the priority list, if not off the list entirely. A night out is a true luxury compared to say, the electric bill. So deals are a necessary enticement. And it’s not  just customers who need the deals; restaurants must rely on them as well.

It used to be that many operators tried to avoid offering deals, citing a well-known list of arguments against them:

  • Don’t train guests to be more price sensitive
  • Limited time offers wreak operational havoc
  • Price cuts bite into margins
  • Competing on price just leads to price wars

But desperate times mean restaurants can’t afford not to offer deals.

I remember when operators could focus on growing revenues by pure and noble means – by adding customers and building check. And by building check, I don’t mean via price increases. It came down to such basics as getting customers to come in more often, and to consume more during those visits – simple, right? Of course new products were crucial, but that’s a tough game. All that R&D, maybe some new equipment, the sell-in, the resistance, and the pressure on each new product to be the next great thing. And if sales saw only a temporary, modest blip, and new items didn’t take off like gangbusters, there were post mortems, lessons learned, and disappointment. It’s a tough game, that quest for new news.

But these days the new news is the deals, and while it’s easy for critics to declare that price cuts are damaging, they should keep in mind how much further sales could be down without these dastardly deals – a difficult calculation to make. On the plus side, deals have sparked some menu creativity and consumer excitement. And some of the associated smaller portions benefit chains and their patrons by promoting health and value, or the perceptions thereof.

We don’t yet know to what degree consumers will retain price sensitivity when prosperous times return. With the pace of store closings and the financial pressure bearing down on everyone from guests to shareholders, it’s hard for operators to think about that now.

So until the smattering of good news we have seen lately about positive performance becomes the norm, the reality is that everyone will continue to love and need a deal, including operators.

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