A customer waits to order food at a McDonalds fast food restaurant on July 26, 2022 in Miami, Florida.
Fast-food chains are playing down the value of burgers, pizzas and tacos as inflation squeezes budgets — but the prospect of higher prices, skimpier portions and more deals is enticing people to sign up for rewards programs while companies are rethinking their value strategy.
In response to the price increase, Domino’s Pizza earlier this year raised the price of Mix & The delivery deal ranges from $5.99 to $6.99, and it offers to implement its national $7.99 service for digital-only orders. Burger King removed the Whopper from its value menu and reduced its 10 items to eight. For the first time, Yelp said customers are citing a “decline” in restaurant reviews, mostly in places that offer affordable fare like hot dogs, hamburgers and pizzas.
“We’ve seen companies tweaking their value menus across the board,” said Michael Schaefer, global leader in food and beverage market research at Euromonitor International. “We’re seeing less of all things, fixed costs are increasing, less things.”
The changes mark a new chapter in the continued evolution of traditional value deals that have become a hallmark of many fast-food chains. In the years since McDonald’s ditched its popular Dollar Menu and Subway put the brakes on its $5 footlong campaign, experts say the industry is trying to reduce its reliance on the kind of advertising that eats into lucrative profits.
And as companies face rising costs of goods and services, efforts to rethink value propositions take on new urgency.
Even as they slowly raise prices or change menu items, experts say fast-food companies are increasingly focusing on value strategies around mobile apps and rewarding programs that allow them to personal trading, as they make more money from each customer.
At McDonald’s, for example, customers can get a free order of fries and 1,500 points for downloading its app and signing up for its rewards program.
In a call last month, McDonald’s executives said the program keeps customers visiting more often and noted another benefit it could bring — the ability to eventually offer more personalized deals.
National sales, by contrast, offer discounts even to people who would pay more, said McDonald’s CEO Chris Kempczinski.
“There’s a lot of waste in this,” he said.
Among the chains offering rewards programs are Chipotle, Chik-fil-A, Dunkin’ Donuts, Papa Johns, Wendy’s and Burger King, which allow members to earn “scores” with purchases that can be redeemed for menu items.
Customized rewards can be successful by giving customers discounts on things they really want, while also allowing companies to control profit margins, said Francois Acerra, director of research and consumer analysis for Financial Management Solutions, the company restaurant data analysis.
“The brands may say ‘Oh, it’s because of inflation,’ but I think the brands are trying to move away from these low prices for a little while,” Acerra said. “Companies are willing to provide value to consumers as long as they can use their visitors’ purchase history to increase customer lifetime value over the long term.”
Apps help companies do this. Given how often people check their phones, an app on a person’s home screen is “like a billboard that keeps on giving,” says Adam Blacker, director of information and communications for Apptopia, a technology company. data analysis.
“The more we look at it, the more important it is to you, just seeing that logo every day can have an impact,” he said.
Apps can also provide information on what and when customers order and which ads they respond to, helping companies fine-tune their push notification strategies.
Still, rewards programs are a new and emerging area for many companies. Currently, one way companies are offering more targeted deals is to offer flexibility to home workers.
McDonald’s executives said the chain will run national sales, such as $1, $2, $3 menus, but regions can choose which products to offer. Papa John’s executives have also noticed how their restaurants are balancing 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 if they’re more aggressive in the coming years, experts say fast-food chains will need to continue offering eye-catching contracts to draw in more customers.
Euromonitor’s Schaefer said: “They will look a little different than in previous years, but there will always be a place for high visibility, low-cost products, which generate more traffic and more fuel. growth,” said Euromonitor’s Schaefer.
