Many restaurants have been offering meal deals, discounts and promotions in recent months, but some are now trying a different strategy: introducing carefully sculpted offers to keep business flowing without training consumers to regularly expect to pay less, reported The Wall Street Journal.
Sandwich shop Potbelly launched a $7.99 meal deal bundling a small sandwich, chips and a drink in July, for example.
“A lot of times you’ll see price-pointed discounts off of existing products,” said Potbelly Chief Financial Officer Steven Cirulis. The problem with that approach is attracting enough diners to outrun the discounts, Cirulis said, noting that while prices and deals at large chains such as Subway are on his radar, the two businesses attract different diners.
“It’s great to see brands attempting to provide customers with value, but it doesn’t necessarily compel us to then do a race to the bottom,” he told the Journal.
The Journal said that among the restaurant chains more aggressively fighting it out with deals and promotions, Shake Shack and Sonic have bet on buy-one, get-one-free offers, while Applebee’s is selling $1 cocktails, 50-cent boneless wings and late-night half-price appetizers.
“The restaurant industry’s offerings seek to entice diners back after around three years of raising prices, and it is working for some, analysts said. Some in the industry, however, are more concerned about getting stuck with big discounts after customers get used to them,” reported the Journal.
“If some product is half-price or buy-one, get-one-free, if that’s out in the channel long enough, that’s just what the consumer comes to expect,” said Jim Salera, an analyst at financial services firm Stephens. “You run the risk of being viewed as always on promotion, so when you go off, consumers will just shop elsewhere.”
The $7.99 offering so far is a success, Potbelly’s Cirulis said, although it is too soon to know the full effect.
Potbelly’s same-store sales, covering stores open for 15 months or longer, rose 0.4% for the three months ending June 30, compared with 12.9% in the same period a year earlier. Store-level margins were 15.7% for the three months ending June 30, compared with 14.4% in the prior-year period, according to the Journal.
Starbucks is scaling back promotional offers through its mobile app and instead wants more of its customers to pay full price for its coffees and teas, according to CNN Business. The move is “part of new CEO Brian Niccol’s strategy to reposition Starbucks as a premium brand while also reducing the strain on employees, who get flooded with work when promotions are high,” reported CNN Business.
Starbucks also isn’t planning to run broad offers during the holiday season, and instead aims to promote seasonal drinks through advertising, according to the Journal.