![]() ![]() ![]() ![]() Price serves as a cue in fast food as well, suggesting a product’s quality is either cheap or premium. After narrowing down their choices to the type of wine they want, they usually rely on price to help them select a bottle since they have little else to help ascertain the quality. Higher prices convey higher quality and better value and lead people to esteem the brand. According to the market research firm Ipsos, nearly half of all Americans are willing to switch to a higher-priced brand if they perceive it to be of better quality. On the flip side, higher prices may actually be more appealing. Penney’s offer of $1.97 jeans last Christmas think those items would be made of quality materials and fashionable designs? In fast food, we’ve brought the judgment on ourselves by spotlighting our lowest-priced products as the “value menu.” We’ve equated value with low prices when we should be shaping customers’ understanding of our complete value proposition. A low price may attract attention, but it dilutes the perception of quality and value. We need to unplug from our preoccupation with customers who want deals and look with a more sober eye at the role of discounts in purchasing decisions. If we want to avoid setting ourselves up for prolonged margin problems again, we need to rethink discounting. As Yogi Berra said, “It’s like déjà vu all over again.” It seems we find ourselves today in a situation uncannily similar to those value menu heydays. In fact, I came across an article that started out with the declaration, “Faced with a crowded market and flat sales, the fast-food industry is locked in a price war that few in the burger business want to acknowledge.” Given how well this seemed to describe the current state of fast food, I was surprised to find it was a piece written back in 1989. And my email inbox and Sunday papers remain filled with coupons from fast-food chains. Subway was offering $2 subs for its “Customer Appreciation Month” last December. Taco Bell introduced a $1 Cravings menu in many markets. But that doesn't mean the category has forsaken discounts as its primary traffic-driving tactic. So what is the right discounting strategy?Ī: True, McDonald's has replaced its Value Menu with the Dollar Menu & More, and Wendy's 99 Cent Menu has been reconceived as the Right Price Right Size menu. Q: Other restaurants seem to be moving away from 99-cent-and-under value menus. ![]()
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