Higher prices, fat-free portions, apps – fast food deals change
Fast food chains are increasing the value of burgers, pizza and tacos as inflation squeezes budgets — but expect higher prices, fat-free portions and more deals that motivate people to sign up for reward programs as companies rethink their value strategies.
Citing rising costs, earlier this year Domino’s Pizza raised the price of its Mix & Match delivery deal from $5.99 to $6.99, and made the $7.99 NEX offer available only for digital orders. Burger King has removed Whopper from its value list and trimmed its 10-piece patty into eight. For the first time, Yelp said customers mention “deflation deflation” in their restaurant reviews, often in places that offer affordable offerings like hot dogs, hamburgers and pizza.
“We’ve seen companies adjust their value lists across the board,” said Michael Schaefer, global food and beverage lead at Euromonitor International, a market researcher. “We’re seeing overall fewer items, limited price increases, and smaller items.”
The changes mark the latest chapter in the continued evolution of the traditional value deals that have become a hallmark of many fast food chains. In the years since McDonald’s dropped its famous dollar menu and Subway pressed the brakes on its $5 campaign, experts say the industry is trying to reduce its reliance on such profit-shattering promotions.
As companies face rising component and labor costs, the push to rethink value strategies is gaining new urgency.
Even as they quietly raise prices or change menu items, experts say fast food companies are increasingly focusing on value strategies around mobile apps and reward programs that allow them to offer personalized deals, while making more money from each customer.
At McDonald’s, for example, customers can get a free order of large French fries and 1,500 bonus points for downloading the app and signing up for its rewards program.
On an earnings call last month, McDonald’s executives said the program was making customers visit more frequently and pointed to another benefit it could bring — the ability to offer more personalized deals in the end.
Chris Kempczynski, McDonald’s CEO, said national promotions, by contrast, give discounts even to people who would have paid more.
“There is a lot of waste in that,” he said.
Among the chains that offer reward programs are Chipotle, Chik-fil-A, Dunkin’ Donuts, Papa Johns, Wendy’s and Burger King, which allow members to earn “crowns” through purchases that can be redeemed for menu items.
Customized offerings can be a win-win by giving customers discounts on items they actually want, while also allowing businesses to maintain profit margins, said François Acera, director of research and consumer analytics at Revenue Management Solutions, a restaurant data analytics company.
“Brands can say ‘Oh, it’s because of inflation,’ but I think brands have been trying to stay away from those lower price points for a long time,” Acera said. “Brands are willing to deliver value to consumers as long as they can take advantage of guest purchase history to maximize long-term customer lifetime value.”
Apps help companies do just that. Adam Blacker, director of content and communications at Apptopia, a data analytics company, said that given how often people check their phones, an app on a person’s home screen “is like a billboard ad that keeps on giving.”
“The rate we look at, the importance it holds within you, just seeing that mantra every day can make an impact,” he said.
Apps can also provide information about what and when customers order and what promotions they respond to, helping companies improve strategies in push notifications for deals.
However, bounty programs remain a relatively new and developing area for many companies. In the meantime, one way companies are offering more targeted deals is by giving local operators flexibility.
McDonald’s executives said the chain will run national promotions, such as the $1, $2 or $3 menu, but those regions can choose which products to show. Papa John executives have also noted that their restaurants have leeway to adjust deals.
“The discount in San Francisco is different than the discount in Atlanta and Ohio,” CEO Rob Lynch said during the company’s earnings call.
But even as their targeting increases in the coming years, experts say fast food chains will still need to continue offering eye-catching deals to attract specific customers.
“It might look a little different than it did in years past, but there will always be a place for high-definition, lower-priced items, driving more traffic and higher-margin add-ons,” said Euromonitor’s Schaefer.