Gauging Engagement | by Christopher Wolf
In recent years consumer advocates, municipalities, and the popular media have been pressuring restaurants to retool their portion sizes and preparation methods in deference to the obesity epidemic. But now the economic epidemic has changed that agenda, putting a new and more urgent kind of pressure on the quick-service industry: Figure out how best to balance consumer value with corporate profitability in the face of volatile commodity prices and an increasingly cost-conscious consumer.
Clearly the pressure has to be relieved somehow and quickly. The problem is how to find an optimal solution to maximize sales and minimize backlash from consumers, franchisees, and Wall Street—a complex task that can take a lot of time and testing to get right before embarking on a systemwide rollout.
Because we live in an age where consumers and reporters can compare notes in a sea of easily searchable news stories and blog comments posted on the Web, it seems increasingly difficult for restaurants to pre-test any new products or menu strategies without the risk of having them marketed to the general public long before the best ones can be chosen and rolled out.
In recent months, several value menu-based strategies being considered by burger chains were reported, disseminated, and put on trial by media and consumers who were quick to condemn the chains for actions they had yet to adopt on a full-scale basis. For example, several food-fetishist blog sites like seriouseats.com, epicurious.com, and 360eats.com jumped on the news last fall that Burger King was testing a smaller $1 Whopper Jr., a higher-priced Whopper Jr., and smaller drink sizes.
So I called some of Burger King’s PR reps to learn more about the cost-saving announcements that had been initially reported to financial analysts but quickly picked up and bounced around the Web. BK execs and PR folk opted not to share more with me about the value strategies in test. But one spokeswoman, Katie Boylan, emphasized that the shrunken Whopper Jr. patty was just one of many options in test and that this fact was not picked up by all sources that reported the change. So, did consumers really notice the 2 ounces missing from their Whopper Jrs. or were they influenced by what they read online?
Likewise, some Web-based reports such as the one posted by Zac Bissonnette at bloggingstocks.com selectively wrote that McDonald’s would be replacing its double cheeseburger with the McDouble, calling the new sandwich the “McStingy,” (presumably because it had only one slice of cheese, instead of two). But while he appears to have spoken directly with a representative at McDonald’s, he failed to mention the continuance and recommended price increase on the original double cheeseburger as another option. His post, nonetheless, attracted 100 comments from various readers of his blog, mostly sharing various levels of frustration with the news.
Hoping to resolve this apparent disparity, I contacted Danya Proud, a spokeswoman for McDonald’s, to get her company’s version of the story. As I had suspected, all this frustration and worry on the part of the consumer was premature. Indeed, the price and portion strategies are only recommendations to franchisees, and McDonald’s made no marketing efforts to reach consumers yet. Proud also said McDonald’s is in a constant dialogue with its consumers, who have told the company loud and clear that they don’t want the double cheeseburger to be messed with. In fact, Proud shared the news that, where the McDouble was tested, stores saw “a large percent of people purchasing the [original double] cheeseburger at the adjusted price. We don’t make any business decisions until we’ve done extensive testing,” she says.
A recent Polldaddy.com survey found that 32 percent of participants plan to choose the more expensive double cheeseburger at McDonald’s while 68 percent will choose the new McDouble.
In terms of downsizing measures, Wendy’s confirmed more than a year ago that it had changed its 99-cent burger to a Junior Bacon Cheeseburger with a smaller patty, before increasing the price a few months later to $1.29. Then in August, Wendy’s introduced a trio of 99-cent signature value sandwiches that included a new Double Stack cheeseburger, the reformulated Junior Bacon Cheeseburger, and a Crispy Chicken Sandwich. Bob Bertini, Wendy’s director of communications told me that the Value Sandwich Trio “is resonating with cash-strapped consumers who are looking for quality meal choices at an affordable price.” That was reflected in the fact that same-store sales were up 5 percent during the month of October, compared with the previous year.
The one chain that seems to have flown under the radar of bloggers and the media through all this downsizing and repricing is CKE. Brad Haley, executive vice president of marketing, says the company’s own consumer research revealed a few years ago that the larger-size Thickburgers with the higher price point created a purchase barrier for some of its consumers, a problem that became more pronounced as higher commodity costs drove up the prices of the original Thickburger line.
Perhaps because CKE has been focusing on promoting its gigantasaurus $4 to $6 Thickburgers in recent years and still doesn’t have an official value menu, no one appears to be examining its market tests under a microscope. As a result, Hardee’s managed a clean roll out of its Little Thickburger last fall, with an in-your-face value price that is double the $1 barrier that other chains seem hesitant to cross. And the strategy seems to have worked, as the company reported same-store sales at 2.1 percent above the prior month, and 3.6 percent higher than a year ago.
It’s still too early to predict which of these varied menu-marketing strategies is the best one to imitate. In my mind, though, McDonald’s pulled a brilliant trump card in addressing the cost/price/portion issue without downsizing its sacred Double Cheeseburger.
In contrast, I’m concerned for any chain that chooses to alter (or even test the idea of altering) core equity items by shrinking buns, patties, and condiments to avoid taking a price increase. With recent studies confirming the notion that consumers are cutting back their quick-service visits in order to save money, there is a temptation and a mandate to cut corners. But, there are also plenty of precedents out there that seem to say that value is less about a specific price point, and more about feeling that, whatever the price, it is worth paying.