By Lauren Shanesy
What’s the difference between these two iced coffee offers: Buy one, get one 50% off and 2 for $10?
Psychology, said Alexis Gillette, vice president of marketing at Dunn Brothers Coffee, while presenting at the 2025 National Restaurant Association Show, held last week in Chicago. One offers a discount, which trains the customer to think that’s the price an item is worth and creates a cycle that’s hard for retailers to break, while the other creates perceived value for the consumer, triggering them to think they’re getting more for their money.
“Discounting can be incredibly disruptive to your business long term because you won’t be able to break the cycle of raising prices and slashing them again,” she said. “It’s about more than driving foot traffic and sales to your store—it’s about driving long-term profitability.”
When you discount prices often, “You’re essentially downgrading your ability to tell [customers] what you should pay for something on a regular day-to-day basis,” she said. “They think, ‘If that’s what it cost to me, then that’s the price.’ Discounting is something that everybody always goes to first—it’s a quick hit that drives sales right away, but it never works long term.”
When creating a value deal that will drive customer loyalty, brand value and better long-term profits, Gillette said she focuses on five components:
Opportunity assessment: Do a deep dive into your business to evaluate your prices and determine which items you can offer for a lower price while still maintaining your margin targets. “Look at what your traffic drivers are and the things people are already coming to your business for—that’s where you start. We’re not going to discount those things, but you are going to create value around them. What are the benefits of those items? Is there something that you do today in your business that you can offer people and position it in a way that drives them in more often?” she said.
Maintain margin: Gillette has previously worked with Yum! Brands, which includes KFC, Taco Bell, Pizza Hut and other QSR companies. Yum! has become known for boxes, bundles and volume-based value deals. “This is putting clever gift wrapping on things that customers are already buying,” she said. When developing Pizza Hut’s Big Dinner Box, she said the company did a basket analysis to see what items customers were buying and which ones they were often purchasing together.
“We wanted to raise the average check. If we could get more people to take a bundle of things that a lot of people were already buying together and promote it with a cool name, a great price point and put it in a cool packaging set, how would that work? It did quite well,” she said.
She said that at the time of launch, the a la carte items cost just under about $30 total, and that the bundle offered them all together for $25. The savings were substantial enough that customers understood they were getting more for their money. From the QSR’s standpoint, customers would often spend the full $25 instead of less on individual items. The price point still kept margins within the target thresholds of profitability.
“That’s the art and science of making sure that the economics still work, that when combined you’re still maintaining profitability, making money,” she said.
Shift behavior: Gillette worked with a coffee chain that had started to see a decline in orders, but discounting wasn’t working long term. Gillette’s goal was to raise the average order value. “I want customers to buy two drinks.”
Going back to the buy one, get one 50% off versus the 2 for $10 example, both offers still get the customer two drinks.
“For the sake of the example let’s say each drink was $6, there’s a 15% cost of goods with a target margin of 80%. That means I can make the drinks $5 and still make money. If I offer ‘buy two for $5 each,’ and they’re used to the drink being $6, then they’re going to see value in it being $5,” she said. “It’s compelling in a way that doesn’t broadly devalue what you’re offering, because I’m giving you a deal instead of a discount. I’m creating value by telling you that you get more for a little bit less today, but you have to buy two. While you are making a slight accommodation on price, you’re still positioning it in the way that lifts up the brand overall.”
Compelling price: No offers work without a compelling price, Gillette said. “Make sure that people feel that the price is something within reach and within value.”
Limited availability: “If you’re discounting something all the time, then that’s the price of the item because you said so. Consumers think that’s the price it should be. People are looking for the next thing, so give them something to talk about and something to be excited about. It’ll give you more flexibility to try new things as well because if you’re following the rest of the rules, then you won’t always be chasing a comp,” she said.
Similar to developing Pizza Hut’s Big Dinner Box and other value meals, there is also a strategy to driving sales and profits through bundling, Gillette said. In an example of a coffee shop she worked with, the operator did not have a breakfast bundle offer. “We couldn’t figure out why customers weren’t buying these complimentary items together, but when you looked at the individual price points of everything, it started to get fairly pricey.”
She piloted a $10 deal for a coffee and breakfast sandwich together on DoorDash.
“What we found was that people were so excited to have this very compelling base price point, and then all of this choice to customize—they were upgrading the milk, changing the drink to something that they want, adding more breakfast meats … and suddenly the $10 meal cost them $15, but they didn’t mind because they’re the ones who built it.”
Behind the scenes, the discount to offer these items together was only about 30 to 70 cents, she said. “That’s all we took off. But we were able to raise the average check on that $10 bundle by $4 to $6 on every transaction. We took off just a little bit to gain a whole lot more.”