As inflation tightens budgets, fast-food restaurants are highlighting the value of their burgers, pizzas, and tacos. However, as businesses reevaluate their value tactics, consumers should expect higher prices, skimpier portions, and more promotions luring customers to join up for loyalty programs.
Earlier this year, Domino’s Pizza increased the price of its Mix & Match delivery package from $5.99 to $6.99 and restricted the use of its $7.99 national carry-out offer to digital orders, citing growing costs. Burger King reduced its 10-piece nuggets to eight pieces and took the Whopper off of its budget menu. Customers are reportedly referencing “shrinkflation” in restaurant reviews for the first time, most frequently at establishments providing inexpensive fare like hot dogs, hamburgers, and pizza.
According to Michael Schaefer, the worldwide head for food and beverage at market research firm Euromonitor International, “we’ve seen companies changing their value menus across the board.” We’re observing overall fewer items, modest price rises, and smaller items.
The modifications indicate the most recent stage in the ongoing evolution of the conventional value offers that have come to be synonymous with numerous fast-food establishments. The industry, according to analysts, has been attempting to reduce its reliance on such promotions that cut into profit margins in the years since McDonald’s discontinued its well-liked Dollar Menu and Subway put the brakes on its $5 Footlong campaign.
And the need to reconsider value initiatives is becoming more urgent as businesses deal with rising expenses for labor and ingredients.
Experts claim that fast-food firms are increasingly focusing their strategies around mobile apps and rewards systems that would let them give individualized offers while making more money off each client, even while they covertly raise prices or change menu items.
For downloading the McDonald’s app and joining the rewards program, customers can receive a free order of big fries and 1,500 bonus points.
The program encourages frequent visits, according to McDonald’s officials, who also mentioned another advantage it might bring: the capacity to someday provide more individualized bargains.
In contrast, national promotions offer savings to customers who otherwise would have had to pay more, according to Chris Kempczinski, CEO of McDonald’s.
He responded, “There’s a lot of waste in it.”
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Chipotle, Chik-fil-A, Dunkin’ Donuts, Papa John’s, Wendy’s, and Burger King are some of the restaurants that provide rewards systems, allowing customers to accumulate “crowns” with purchases that can be redeemed for food.
According to Francois Acerra, director of research and consumer analytics for Revenue Management Solutions, a restaurant data analysis company, personalized offers can benefit both customers and businesses by providing discounts on the products they want while allowing businesses to maintain profit margins.
Brands may claim that the increase is the result of inflation, but in Acerra’s opinion, they have been working for some time to get away from those lower price points. As long as they can use customers’ past purchases to increase customer lifetime value over time, brands are eager to offer value to consumers.
Apps aid businesses in carrying out this. According to Adam Blacker, head of content and communications at Apptopia, a data analytics business, an app on a person’s home screen is “like the billboard ad that keeps coming” given how frequently users check their phones.
“Just seeing that logo every day can have an effect,” he said. “The rate at which we look at it, the importance that it holds within you, can all have an effect.”
To help businesses improve their plans for push alerts for offers, apps can also provide information on what, when, and how customers are ordering, as well as which promotions they respond to.
However, for many businesses, rewards programs are still a very new and expanding industry. Giving local operators latitude is a one-way businesses are delivering more specialized deals in the meantime.
Executives from McDonald’s noted that while the firm will run national discounts like its $1, $2, and $3 menu, regions can choose which products to sell. Executives from Papa John’s also mentioned the flexibility their restaurants had with deals.
During the company’s earnings call, CEO Rob Lynch noted, “A discount in San Francisco is different from a discount in Atlanta and Ohio.”
However, experts suggest that even as they become more focused in the upcoming years, fast-food restaurants would still need to offer alluring promotions to attract particular clients.
There will always be a place for high-visibility, low-priced items that encourage traffic and higher-margin add-ons, according to Schaefer of Euromonitor. “They may look a little different from in years past, but they will always have a place.