Transcript of Food & Restaurant Marketing Podcast – Episode: The Ups and Downs of Restaurant Loyalty Programs

Transcript of Food & Restaurant Marketing Podcast – Episode: The Ups and Downs of Restaurant Loyalty Programs

[00:00:03] Adam Pierno: All right, welcome back to another episode of Food and Restaurant Marketing. I never get tired of saying that.

[00:00:11] Dan Santy: Right.

[00:00:13] Adam: So again I am Adam Pierno and I’m here again with Mr Dan Santy.
[00:00:18] Dan: Good afternoon.
[00:00:20] Adam: Today we are going to talk about something near and dear to our hearts, loyalty programs for restaurant brands.
[00:00:27] Dan: Well may be near, but not dear. We’ll see what I have to say about that later.
[00:00:34] Adam: Yeah well we’re, I think, unique educates, because we’re neither advocates or enemies of loyalty programs, we definitely are pragmatic about it.
[00:00:44] Dan: Absolutely.
[00:00:46] Adam: The key is: really when does it make sense for the brand, what stage of life the brand is in, how are sales, how are your customers, what does loyalty look like?
[00:00:53] Dan: What’s the strategic initiative that loyalty programs are designed around, but we’ll get into all that here now in a minute.
[00:01:00] Adam: Yes, we can we can jump in, so let’s talk about some of the reasons that we’ve seen brands launch loyalty programs. You know essentially what are you trying to do when you’re when you’re launching a program like that.
[00:01:13] Dan: That’s the number one problem with loyalty programs, I’m glad we’re kind of getting at that thing that irritates me the most about watching brands that jump into this field because I think a lot of times it’s a strategy that people will employ due to a short-term problem, and because it’s a short term problem they think they’re solving, they jump into it and they go and, forgive me Fishbowl but I’m gonna pick on you here. They call a service like Fishbowl and they pay them the fee and thirty days later, whatever the case may be, they’ve got a lot to program up and running, but they’ve not really thought through any of the mechanics of the program, do they really think it’s going to work, if so how and what’s the phase one, phase two, phase three of a loyalty program.
[00:02:04] Adam: Right, what’s the end game besides the short term problem.
[00:02:08] Dan: Exactly.
[00:02:09] Adam: So for everybody listening we know that you are keeping track on a daily or hourly basis of stats like traffic, sales and counts, looking at average ticket, looking at repeat traffic, so how often are people coming back and how are people kind of peeling off and losing interest in the brand. Those are the metrics that usually, that we’ve seen trigger panic from operators where they say well we better do something to create some loyalty here.
[00:02:41] Dan: Right and free — listen, I’m a big fan, I’ve got a friend of mine back east, he’s in the finance game and he says that people — number one, they like free sh*t, forgive me for saying it. And number two, they like cheap S-H-*-T, so it makes sense, right? Like OK well we’re going to reward them for coming back, but are are we really rewarding them for coming back or are we just getting the least amount out of them and then rewarding them based on whatever formula we’ve created.
[00:03:15] Adam: Yes, and that’s something that we always debate, we’re going to talk about that when we get a little further into this, but you know at the top if your goal is to solve a traffic problem, if traffic is down then what we always say when we’re — when we look at these programs, make sure you’re engineering a program that has traffic as a defining metric. I get loyalty from making multiple visits, if it’s sales then reward me for paying more or buying more things.
[00:03:43] Dan: Exactly.
[00:03:43] Adam: A lot of times Dan referenced Fishbowl, there’s a lot of “out of the box” programs-which I like turnkey-but turnkey often means one size fits all and we know that, no it doesn’t.
[00:03:56] Dan: Absolutely not.
[00:03:57] Adam: It fits awkwardly.
[00:03:59] Dan: At best. That’s right and having discipline to be strategic is hard in today’s world, I get it. You’ve got pressure from either the C-suite, depending on who you’re reporting to, if you are the C suite you’ve got pressure from private equity or the markets, whatever the case may be, so I get that. However, when you implement a program like this you’ve got to look across the entire spectrum of your marketing effort and say “Where is this going to fit in, how does it fit in and the why?”.
You referenced earlier, Adam, all the data that’s available to our clients, they have so much information as a matter of fact, a lot of the articles that (I’m going to digress here from), a lot of the articles you’re seeing lately is big data, great almost like it’s too much data now, now we’re overwhelmed by it and in some respects when we’re overwhelmed we don’t pay attention to any of it and we resort to anecdotal commentary.
So you’ve got to look at the data and say “Where are my real core problems, what’s really happened to the brand” look over a longer period of time, don’t look at the quarter, heck don’t even look at the last year, look at over a two-three year period, because you have that kind of data and say “When were things good and why, when did things start to suffer and why and how do we get that back?” That requires discipline to look at the data and be very analytical about that data and number two is, then make conclusions you’ve got to draw conclusions and make recommendations, which is risk oriented and I know everybody’s a little risk averse and they’re just looking for a solution orientation or tactical and we implement things that ultimately fail.
[00:05:52] Adam: If you just jump to a conclusion, it’s not good. There are some brands that are doing it very well so we want to talk about those and look at what we can learn from those brands so one brand that does it exceedingly well is Starbucks, they’re not exactly a restaurant, definitely atypical in everything that they do, but their loyalty program is really great-
[00:06:16] Dan: And you discovered, this was your revelation or your insight, really, about a year ago, maybe a year and a half now, when we did a study of what’s happening in the restaurant industry and we came up with this idea about — Adam came up with this idea about friction and when you create friction in any program, any marketing program and specifically, specially in loyalty, you’re reducing its opportunity to be successful. When something becomes frictionless, which is what you talk about a great deal to our consulting clients is exactly what Starbucks has done, they’ve eliminated any of the friction, it’s just really peerless in how they execute this. Now they have an enormous brand loyalty about them they have a high frequency level-
[00:07:08] Adam: and they have an advantage in their product mixes, it’s just a lot different, they have a lot more flexibility, so if they’ve got me down I figured it out this morning in preparation for this I get about one cup free for every five I buy.
[00:07:22] Dan: Interesting.
[00:07:23] Adam: And that’s the metric. I sort of watch the points they offer me and they’re very opportunistic, the way they offer me programs, I compared notes with other people here and I say “Hey, I got this thing so you get two hundred points, did you get it?” “No I didn’t get that one.” “But I was in there last week.” “Oh, I hadn’t been there in a month.” A lot of times we talk about customization of these programs, we talk about digging into the metrics and everybody talks about all the data. I can tell that Starbucks is actually using the data to provide better experience and unique offers to people based on behavior, they’re triggered by actions or they’re triggered by absence of actions and they’re unique to each person. Standing ovation for that and it actually is effective on me and I’m pretty cynical about these types of programs.
[00:08:09] Dan: Here’s the important thing to understand about — what Adam’s talking about, the number one thing they’re doing is leveraging technology, leveraging data and algorithm to understand his behavior in order to then optimize how they’re going to reward him. That’s a whole another level, you know. I’ll go — again, forgive me Fishbowl, you guys are perfectly fine people, I’m sure, but like Adam said, that’s just this basic “out of the box” solution-
[00:08:40] Adam: One size fits all.
[00:08:41] Dan: One size fits all and it’s not going to do — it’s not going to get anywhere near doing what what he’s talking about, now we’re also saying that some mid-sized brands, even smaller brands, don’t have the resources to use that technology or employ that technology. But again, back to my “phase one, phase two, phase three” comment I made earlier, think this through. Say “phase one, let’s get something launched, let’s launch it on this level with the plan”, test and optimize, that’s what we always say. Test it out, optimize it and continue to make it better, which I believe is another thing that Starbucks has done over the years is continuously improve on their program.
[00:09:26] Adam: We did a survey here to get to some brands that people really like their loyalty program, Red Robin showed up a lot and that’s a brand we just talked about in our last podcast on brand extensions. I guess the thing people like about it — and this is something Dan and I talked — we debate this endlessly, is that the biggest comment, the most common comment that came back about Red Robin was “I feel like I’m always getting a reward. Every time I go I’m getting a reward.” And the follow up questions are “Were you already loyal to the brand?” “Well, yes.”
[00:10:00] Adam: So you’re already loyal, you already like it, you’re already a regular and now we’re giving you something for free every single time you come in. Dan, do you think that’s smart?
[00:10:07] Dan: That falls under one of my favorite things. What Red Robin is doing whether it’s deliberate or not, in my opinion, is — they’re surprising and delighting you every time. If that frequency of which I’m getting rewarded is high, I’m going to not be as critical of what the reward is. If it’s an order of fries, a fat-free soda or whatever the case may be, I’m just like “Wow, great, thank you. You just gave me a reward last time” versus “I got five more visits before I get a nickel.” Surprise and delight is another — quite frankly, it could be its own loyalty program if implemented correctly. That’s a whole another subject really falls under the restaurant experience.
[00:10:55] Adam: No, and it’s interesting because they are — it’s very dissimilar to the Starbucks program. There’s no app, you just use your phone number, and it is a kind of a surprise and delight. The offers are different every time. There is a wide variety of things, sometimes it’s a free sandwich or a free soda or free dessert. It’s varied and it is surprising whereas the Starbucks one is always these points that you are going to redeem and choose. They work for different reasons and obviously two different types of customer. So I love that they’re different.
I’d be surprised if those two operators have the same program, both really good programs. The last one that came up was Chili’s. People just really like that program. They just felt like one of the most common things about it was, it was referred to as “under the radar”, pretty common, or no pressure to join which came up a lot that it’s almost got that speakeasy effect. They’re not pushing it on you and saying “Download this app today” every ten seconds, just pretty easy to get rewards and there’s not a lot of pressure around it. I think we know a thing or two about people and how much they like being sold.
[00:12:00] Dan: Oh my gosh, that example about Chili’s is the number one thing that drive me crazy about a lot of casual dining places. You can tell — now again, I’m in the consulting industry but I hate when I get my check at the end and there’s this postcard, and then the waiter puts the pitch in or the waitress, and says-
[00:12:25] Adam: “You guys are members of the app yet?”
[00:12:27] Dan: “Sign up here.”
[Crosstalk] [laughter]
[00:12:25] Dan: And you know damn well that these-
[00:12:28] Adam: Well, I like that they — when they employ training, but I don’t like when they get there.
[00:12:32] Dan: I do to, yes. I have to give him credit because I’m sure there’s some level of advocacy to it but it’s so blatant and so obvious. Then three months later I come in and they’re no longer doing it. You know it was a promotional period and they were spiffing kids to — the guy who got the most sign ups in the day got a free ice-cream cone or something like that, I don’t know. But I guess, to your point, people don’t like to be sold. As you pointed out, we’ve learned that a long time ago.
[00:13:03] Adam: Yes, we know that for sure. When we compare and contrast these three brands that they do it really well, and there will be a blog to follow up on this with a little more detail. One of the common elements of all three is there’s no pressure to join. All three of them are very hands off, their signage was POP. You go to their websites, you can see it. Especially on mobile for Starbucks, where there’s a downloadable — download button. They don’t really hit you over the head with it at any of those locations. The Red Robin one is almost hard to find.
[00:13:33] Dan: Yes, interesting. Adam, correct me if I’m wrong. McDonald’s have a loyalty program?
[00:13:40] Adam: No, sir. Even during their darkest time they did not roll out a loyalty program. {Editor’s note: Reports in the link above to Forbes suggest they are investigating a loyalty program or app}
[00:13:47] Dan: I think there’s a lot to be said about that.
[00:13:49] Adam: Why do you think that is?
[00:13:50] Dan: It’s a it’s a great question. I think they understand that they have a frequency level from their customer, and they have a price point, a value play that they’ve got going, that I don’t think they’ve got a lot of room to buy ten burgers and get a 11th one free.
[00:14:07] Adam: You think it would impact margin.
[00:14:10] Dan: I think so. When I look at Starbucks and Red Robin and Chili’s and I don’t know all their margins but you have a general idea based on our experience what the ranges are, their margins are reasonable. Starbucks is ridiculous, giving away a cup of coffee to me for buying five cups.
[00:14:27] Adam: That are marked up 500%.
[00:14:34] Dan: Yes exactly. That’s one theory I have about McDonald’s.
[00:14:38] Adam: No, that actually makes a lot of sense.
[00:14:40] Dan: The other is that it’s a frequency play, that QSR. They’re getting the most visits.
[00:14:50] Adam: McDonald’s is a good — you brought up McDonald’s but now that I’m thinking about it, there’s not a lot of QSRs is in general, true QSRs, fast food hamburgers that have a — none of them have a loyalty program.
[00:15:03] Dan: Burger King I don’t believe has one. I don’t know if Subway does or not, I probably could have done that homework. Anyway I just find it interesting that the- {Editor’s note: BK and Subway do in fact have underpublicized programs (linked above)}
[00:15:09] Adam: They have promotional periods but they do not have ongoing sub program.
[00:15:13] Dan: Which we’re going to be talking about that discounting on another podcast later.
[00:15:19] Adam: But yeah, we just brought up the punch card. I think people hate the punch card. It seems like although Dutch Brothers came up and they are the only one that does have a punch card that people really like. People don’t want to carry it around, they don’t want to remember it, they want to kind of put the onus on the brand. And I think brands would be wise to heed that advice. The more you make me work and the more friction that you add, as Dan referenced earlier, the less of a response you’re going to get. You jump through the hoops, not me.
[00:15:48] Dan: Exactly I was at CVS the other night, completely different category. My wife had already signed up for whatever their program is, and I don’t have to do anything I just give them her telephone number.
[00:15:57] Adam: Right.
[00:15:59] Dan: And her name comes up. And they’re not rigid, they don’t go “Well, who are you? You’re obviously not Liza.” [laughter] “No, I’m not. Not yet.” But man, talk about easy. Then I get this printout that says “You just earned ten bucks.” And I’m like “Oh, what the heck, ten bucks.” There’s that frictionless thing again that we are talking about-
[00:16:29] Adam: They just basically hand it to you as a coupon. That’s the way to do it. What people forget and we laugh about this, we talk a lot about hospitality on the food side and we sort of leave hospitality off at almost everything else we do in a restaurant. This is a hospitality play, even the loyalty club or the loyalty program, you have to make it easy and be a good host and say “Okay I’m going to roll this program out to build loyalty, I’m going to make it really easy for you to use it, as a good host. I’m not going to build it and put up all these gates around it and put an alarm on it, make you climb a ladder and ring a bell. I am going to make a very low barrier to entry, because I want you to do it. I want you to really feel like you’re getting something for nothing.” It’s not easy to do but it’s worth it.
[00:17:17] Dan: I couldn’t agree more. Take a page from your local bartender. You go and you take care of them night after night. Every so often, a couple of those cocktails aren’t going to be charged to you. Talk about frictionless loyalty program.
[00:17:34] Adam: Yes, and I think the other thing all three of these do in dovetailing right off that, is they make it pretty easy to rack up a reward. It can be something really small, an app or a free drink or something, but Starbucks, Red Robin and Chili’s all make it pretty easy. Although from the research we’ve done, Dunkin‘ brands — people are saying they get almost a free coffee a week from that program. I have not used that program but they say it’s very easy to get free cups.
[00:18:04] Dan: They’re finally getting some — they’re getting enough locations out here in the West. Actually, we can start becoming Dunkin’ customers again, Adam being from — both of us actually being from back East there’s a there’s a Dunkin’ on every corner.
[00:18:19] Adam: We were just down and count here a little bit but hopefully they’ll start adding more. What are some of the typical flaws with these loyalty programs? Not the three we were just talking about, but in general.
[00:18:33] Dan: Well I go back to what I was saying earlier and that is not thinking through the strategy. They get fundamentally flawed because you haven’t spent the time to say “What do I want to reward? What behavior am I trying to change or effect?” It’s the strategic side of it, it’s so easy to become tactical around loyalty that, you just go “Well, let’s do this, for every five you get one”, or whatever the formula is. That’s just some random formula that somebody came up with versus saying “Hey, here’s the behavior we need, what is going to change that behavior? What loyalty effort should we put in to get that behavior to shift?”
[00:19:18] Adam: That’s right and you’re speaking of strategy, we always relate strategy to finding the ideal customer and understanding how we want to move that customer and how to make them have a great experience. If in that “buy five, get one” model — really what you’re doing is you’re bringing in a coupon customer that’s looking for 20% off. They’re looking for one-fifth free. If you have a traffic problem, is that the solution long term to a traffic problem to bring in a thousand new guests that are all discount hunters and only come in when there’s a coupon or a program in play to give them something free?
[00:19:43] Dan: Right.
[00:19:44] Adam: Your sales are not going to increase even though your traffic is going to.
[00:19:59] Dan: The thing that you don’t know is, would I have come in five times anyway, without the sixth incentive. All you’ve done is giving it away and I would argue that I have not necessarily walked out feeling great, going “Woohoo, look at me” because what I’m thinking about is what I had to do in order to get the free.
[00:20:07] Adam: Right.
[00:20:00] Dan: You didn’t have to do anything and I was coming here anyway. Again, that’s that piece of saying is it really — are you creating loyalty, is it a true reward? When I look back on it, my experience with it is that if I had to do all the work to get the reward, I’m not giving you very much credit for it as a consumer.
[00:20:30] Adam: Right, absolutely. One thing we’ve always looked at, are we conditioning people to come in and just expect the reward. Is that smart? What we try to do in our consulting business is really understand the best customers and know these people. Are they going to come no matter what, they’re loyalist. You have this core, or you have a broken audience. Let’s do something to spiff some people and get them in the door to try it, and we think once they try it, they like it.
[00:20:59] Dan: Exactly.
[00:21:00] Adam: It’s where is your concept from an evolution standpoint. How much help do you need, what kind of guests you have, and how much can you rally those people.
[00:21:09] Dan: I would say that the question is, what’s flawed about some of these programs, “Have you looked at your competition?” People are probably getting really annoyed with me right now, because they’re like, “Jesus Christ, how much work do I have to do to put this loyalty program back,” but-
[00:21:24] Adam: Jeez, a lot.
[00:21:26] Dan: You should do a lot, because you’re giving up profit, you’re giving away a product. Make sure it’s intelligent. You got to look at your competitor and say, “What are they doing? Can we do it better? Do even need to do it at all?”
[00:21:43] Adam: Right, yes. “Are we sure this is the right answer?” The other thing about when you create a loyalty program, you’re building discounting in, you’re building in cut margins overall, over the whole product category of everything you got. Profit at that point relies heavily on upselling, training your staff to really provide a great experience so that, for someone like me that goes in, and I’m ordering just the basic thing to get the reward, I’m upsold, also adding an appetizer or a side, or extra large, or a combo. That’s got to be trained in too. When you’re rolling out the loyalty program, making sure your staff knows. The way we’re going to make money on this is by blank.
[00:22:29] Dan: Right.
[00:22:30] Adam: Right?
[00:22:30] Dan: Yes.
[00:22:30] Adam: Making sure that operations is rolling that out at the same time.
[00:22:33] Dan: It’s so, so critical. The better programs do exactly that, gets in it for that pizza, I’m just making that up, “Won’t you upgrade that pizza for a dollar more, I can give it to you”, this way or the side, as you pointed out, the drink or whatever case may be. I think they managed that customer that’s going to be, as you pointed out earlier, that coupon customer who is very rigid, and really like “No, this is what I’m getting-”
[00:23:01] Adam: “I’m spending 3.99 for my six inch sub and not a penny more.”
[00:23:04] Dan: Yes. And that’s fine. We know that that consumer’s out there, and we love them too, but if you don’t have the training in place to at least be asking, you’re not going to get the weakling like me, who goes, “Oh, I’m not spending as much money this time. Why don’t I get that side”, or whatever the case may be.
[00:23:28] Adam: Yes, and you feel like you’re getting a deal, so you don’t mind that little splurge. I think the key is to not punish people for participating. The key is to make it easy for them, to give them something so they feel like they’re getting a deal, even if they do uptake the upsell, and then really make it feel like a reward, and not feel like a punishment.
[00:23:48] Dan: I love this next topic, it’s part of this whole discussion around loyalty and you asking what have been some troubled programs. I got to tell you, I couldn’t agree more with your commentary earlier to me, before we started the podcast, about Chipotle. They roll this thing out, they make a big deal out of it, and then all of sudden, you never hear another word about it. It was a short lived thing.
[00:24:14] Adam: It was a weird LTO loyalty program, that was-
[00:24:17] Dan: Yes, it was-
[00:24:18] Adam: Confusing.
[00:24:19] Dan: Yes, it was confusing, it was weird, it felt desperate to me. I just find it so interesting that this brand that had such a shine on it for so many years is just struggling to really get back. They really are.
[00:24:38] Adam: Let’s talk about that. Obviously, the loyalty program was conceived to fight that. Traffic is down, sales are down, stock is down. The founders getting chased out of there by activists-
[00:24:50] Dan: [laughs]
[00:24:49] Adam: It’s all, nothing good’s happening. Obviously, this was a promotion they created to try to get people back in, try to reset. It was designed very deliberately with frequency in mind. You could see how they plotted it out if you have spent any time researching it. We will have a link in the show notes of the program. Obviously, it didn’t take. I think the people who used it were people that were already one foot back in, and they used it like a coupon.
[00:25:18] Dan: Exactly.
[00:25:19] Adam: Now, they’re not back.
[00:25:21] Fan: Right. Again, there’s probably strict strategy error that may have been made. We’re not inside the Chipotle, so we don’t know. We wish someone would call us and yell at us from Chipotle, we would love that.
[00:25:32] Adam: Yes, we will help, yes.
[00:25:35] Dan: I do believe if trial or retrial, in other words lapsed customer was the true strategy, is that really the answer? I just read that they’re testing television. You know me and television.
[00:25:53] Adam: You love television.
[00:25:53] Dan: Television and I are going to our grave together.
[00:25:56] Adam: [laughs]
[00:25:56] Dan: It might actually be a potential savior for them, depending on how they do the commercial. I’ll be commenting on that in another podcast, I’m sure. But again, I think your point is well taken. Why did you do that loyalty program? What you really thought that — I’m a lapsed guy from them. Now I’m a low frequency Chipotle guy. You’re probably above average to me-
[00:26:27] Adam: Even now, I’ve started going back.
[00:26:29] Dan: You went back.
[00:26:30] Adam: I ate there today.
[00:26:31] Dan: You did?
[00:26:32] Adam: There was zero- [crosstalk]
[00:26:32] Dan: You don’t look green or- [crosstalk]
[00:26:34] Adam: There was no wait. There was no line. It’s part of my favorite thing.
[00:26:37] Dan: No.
[00:26:37] Adam: The food is back to normal, and the lines are not. When there’s a wait, I probably- [crosstalk]
[00:26:42] Dan: See, that could be a reason I might go in, because there’s no lines. [laughs]
[00:26:46] Adam: Yes. You know I have seven minutes for lunch. I just go out running and get it- [crosstalk]
[00:26:50] Dan: Who allowed that much time for lunch around here?
[00:26:52] Adam: [laughs]
[00:26:53] Dan: That’s what I want to know. I feel like they did some research, and they asked the customer, “If we did this, would you come back,” and they said, “Yes, probably.” [laughs]
[00:27:06] Adam: Well, it’s that researcher, it’s that top two box at 60% in 10. It’s like “that doesn’t mean anything, you idiots.”
[00:27:13] Dan: [laughs] Yes, exactly.
[00:27:14] Adam: Of course, it’s easy for me to say, I’m fine.
[00:27:16] Dan: Okay. They’ve been a good punching bag, maybe we should-
[00:27:20] Adam: Yes, they don’t need to- [crosstalk]
[00:27:21] Dan: -move on to Dutch Brothers and their punch card.
[00:27:23] Adam: Yes, we’ve talked a little bit about the punch card, but people in our little poll that we did, which was far from scientific, people just bashed it. The comment we got was, “Love the brand, love that they have a program, but hate-

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Transcript of Food & Restaurant Marketing Podcast – Episode: Brand Extensions

Transcript of Food & Restaurant Marketing Podcast – Episode: Brand Extensions

[00:00:05] Adam Pierno: All right, welcome back to another episode of Food and Restaurant Marketing with me again with Mr. Dan Santy.
I’m Adam Pierno; you get to hear my mellifluous voice for the next 20 to 30 minutes speaking about another issue in the restaurant space that we’re very passionate about. Today we have an interesting topic do we not Dan.
[00:00:32] Dan Santy: We do. I’m excited about this topic because I love talking about when brands go off strategy and off point.
[00:00:40] Adam: Yes, we do learn a lot from that and what’s funny is we’re Dan and I we will spend a lot of time together, so we talk about this stuff all the time and then we try to organize it into a 20-minute conversation [laughs].
We have a 10-minute conversation before we hit record, so it’s funny for us a lot of this stuff maybe we have coming back in the surface for us.
[00:01:03] Dan: But it makes us feel better though because we get to say it twice.
[00:01:07] Adam: Yes, now we know we nailed.
[00:01:08] Dan: Yes.
[00:01:09] Adam: That’s good. Okay, the topic today what we’re looking at is lighten us some recent stories going back about 30 days. We want to talk about why restaurants not succeed more often at extending their brand or their line. You know a CPG that means, “Hey, we make a product A, and we can also make product B that is somewhat related.”
But in the restaurant space, it seems harder and harder for a restaurant brand to capture what the essence of the brand is that makes customers come. A lot of times they stumble when they try to do a variety of things to expand their reach, and that could be either what we were just talking about adding locations or offer a new kind of food offering that’s receiving a lot of types of spin-offs.
[00:01:57] Dan: Yes, typically what happens is that they have a growth trajectory, right? A new brand or an existing brand around for a while and then their trajectory flattens out, and everybody’s always looking for growth and so that’s typically the genesis of these steps. C-suites sits around and talks about well what if all the what ifs out there instead of focusing on your core operating and say, “If we got 500 locations and each have of four walls we have X amount traffic coming through, how do we do what we’re doing better.?
How we do we’re doing a more complimentary way that we can add sales. But that’s just not sexy quite frankly. It’s sexy to say, “Hey, let’s go to this new thing.” Jamba— you just brought that up to me a little while you were doing, they opened up kiosks.
[00:02:53] Adam: Yes, let’s talk about that.
That’s definitely one of the new stories here that we wanted to use as example in a way into this conversation. I think about two years ago that Jamba Juice announced this JambaGo platform where it was essentially kiosk, self ‘serve. They wanted to be able to put these locations and a lot of underserved areas with a smaller much smaller footprint, and their stores are pretty small to be fair.
Those are not huge boxes, but they wanted to figure out how to do it even smaller and in schools and in cafeterias and at hospital, anywhere there’s food service. Not surprisingly to me and this is what I think is always true, outsiders can always look at these things and tilt their heads and say, “What.”
[00:03:40] Dan: You’re right, it’s easy for us to critique.
[00:03:044] Adam: Well, yes and we love doing that. But it always seems incongruous with the business. Have this moment when I saw the JambaGo platform upfront and then when I read the news story that they were pulling the plug on it was like, “Yes, right that doesn’t even make sense.” What you said earlier I think is important, “It’s not sexy to solve your traffic problem.”
[00:04:10] Dan: Right.
[00:04:10] Adam: As small as those stores are their dollar per foot and their traffic per store is probably flatter going down as the trend changes and that was –
[00:04:21] Dan: That’s having a such changes and all of that but what I think was terribly flawed about it from the get-go and I think is why we all tilting our heads pointing this out earlier.
Part of the experience of going to Jamba is seeing them make that your drink- fresh.
[00:04:41] Adam: Right.
[00:04:41] Dan: Right there in front of you and that’s a huge piece of it, and now I can see the ingredients going in, I can see how they’re making it. I think I’ve never had better experienced about that the flavor profile that product quality that is attached to it versus something that’s dispensed with no theater if you will.
[00:05:02] Adam: Right, and then behind the scenes maybe it is a fresh fruit and vegetables that are dropping into all that get served up it. To my eyes, it might as well be the Slurpee machine that’s just turning that juice.
[00:05:16] Dan: Right, it’s sterile right. The experience is very sterile.
[00:05:17] Adam: Well, they reduced it to transactional we just be opposite of the trend we need to have we’re going to be going to be traffic and sales is how do we play up that theater and make up something experienced and just even an tiny bit memorable.
[00:05:31] Dan: Right.
[00:05:31] Adam: The next the next brand that I wanted to talk to for example and then we can dive into this, Red Robin. Red Robin is a brand that is a hot chain, they do a lot of things well. But they opened up a brand extension called Burger Works that was meant to compete with the Smashburger and the Five Guys of the world fast casual version of Red Robin.
[00:05:58] Dan: Right.
[00:05:58] Adam: They’re closing that down. I think they opened a dozen or so test units and they’re closing those down some of them will reopen as I think Red Robin express maybe their call.
But again Red Robin just said, “Well, we’re selling burgers and those guys sell burgers and couldn’t we just change the name and do the same thing?”
[00:06:19] Dan: No-no, and when did they do it? The late entry alone was pretty I think ridiculous. There’re many of these brands now what is burger work she’ll start a whole new brand and educate people about what burger work is and convince me it’s better than Steak & Shake, it’s better than Smashburger better, it’s better than Five Guys, it’s better than that.
That’s a tall order and if you took that same energy, same resources whether it’s people or money or time and poured it into your pool earlier, how can we improve traffic at our core brand? That money’s going to be far better snack, and I think you are realizing it to be greater in that situation. But it just isn’t sexy because a lot of times you have a mature brand like Red Robin is we get a little myopic and like, “Well, there’s not much else we can do. We tried everything.” We know from experience that that’s not true, we’ve revived a couple of dying brands in our careers and consulted on these dying brands and are thriving and growing today as a matter of fact which quite frankly took a lot of work, a lot of energy but it pays off.
[00:07:36] Adam: Yes, and a lot of times just by optimizing what you’re already doing and killing some poor performing items and changing some things about training. I wish it was that easy but isn’t. Let’s talk about why they try to do.
Number one traffic right now, industry-wide it’s down; traffic is down there’s more competition, so traffic is going to get spread out by concept. They’re looking for ways to improve traffic and honestly is it—Dan, do you think it’s lack of confidence or is it– what is it about the idea of, “Hey, let’s go start this other thing instead of just investing in the four walls?”
[00:08:21] Dan: A lot of times the when I see the brand is struggling. Traffic which is down that means probably same store sales are down and the ownership team in whether it’s private equity or if it’s a public company they’re looking at the C-suite.
They are saying, “You know what? Maybe it’s time to change it up. Xx been here for ten years, he’s not making a difference.” They bring in a new C-suite, so start at the CEO he/she brings in her/his team, right? And they’ve been tasked, “Turn this thing around,” and of course, we all know money is not patient especially when it’s coming from private equity or public company.
[00:09:05] Adam: Any shareholder outside your organization
[00:09:07] Dan: Exactly and they’re seeking to do things to look like they’re doing something smart, strategic that could have a material with that. In my opinion, that’s where the flaw begins right in there because how sexy is it that you go to your chairman’s board and saying, “I have a three-pronged strategy to improve traffic at the core brand.” He’s going to look at you and say, “That? What?” You don’t have to wait for this strategy to take.
[00:09:38] Adam: That’s right. That’s a person that’s trying to win the board meeting versus the long haul. We’re working with someone else who unfortunately I can’t name who is getting ready for a board meeting and doing great job that’s like, “Here’s what we’ve done just in the four walls and here’s what we’re going to do just keep having those things home I think we can eke out another four or five percent.” And I just I like.
[00:09:58] Dan: Here’s the two-point advantage we got from it. There is ROI, so we’re heading into the right direction.
[00:10:05] Adam: To me when you say money is not patient, as a shareholder, I love that story of a team that’s saying, “How do we tighten the screws on what we already have and what we’ve already invested to give you more return?” I enjoy strategically versus, “We can get more revenue if we open another chain that’s something like ours.”
[00:10:28] Dan: Well, the burger example is the best example. “We make great burgers.” I can hear their conversation, “We make a great burger. We’re just sit down now, and less people are going in to sit down, and they are going to pay the check,” and I can hear their conversation. But again like I said earlier, too late.
[00:10:47]Adam: Yes, and I think the second reason, new ways to get revenue. New lines of revenue’s very sexy. I think the other thing that we look at is defensive posture. I don’t think this is true in the Jamba Juice example; I think that was more revenue. For Red Robin, totally defensive play. You could hear the chest pounding of, “We’re the king of the burger experience, and those guys don’t even have half of our experience. We could just dip into that cut service and squash them.” It should be much better. Well, if only.
[10:11:17] Dan: Yes, on the flipside, when you brought this up earlier is Arby’s. I got to tell you I’m impressed with Arby’s. That was a fledgling brand a number of years ago, and they have been doing a good job with the strategy of saying, “Okay, who are we at our core? And what else can we do that’s related to the core? Let’s now go start reconserving tacos, and hold on, and get an extra visit from our loyal customer. Let’s get a new visit from a lapse customer because also now we’ve got something going on.” They talk about what they did because I bet their menu extension was brilliant.
[00:12:06] Adam: Yes, one thing that Arby’s has been doing great is not just knowing their brand, but it’s knowing their core customer, and knowing, “Okay I can get an extra occasion. I can get them excited about adding on.” This year they had their sliders menu. What a smart idea because they’re known for meat they have their meat platform, and all they keep doing is figuring out new wrinkles of that. I think I’ve read that they’re testing venison which I think will fail —
[00:12:32] Dan: [laughs]

{Editor’s note: Boy were we wrong so far. Sold out of samples at test stores. Let’s see how it goes in a regional roll out.}

[00:12:33] Adam: – But I like that they are testing the limits of it, and it’s all on the menu. They can do that in some tests stores. The sliders was another example of, it’s all things that they already sell, it’s a new way to have it. As an Arby’s customer I could see myself at the menu saying, “Okay, that makes sense with what I’m about to order. I could try one of those, or I could substitute three of those for what I normally get.” It was successful from a sales perspective.
[00:12:57] Dan: How about it being a shape or a creator tool? A slider? I can get a slider at three o’clock, and it’s my afternoon snack.
[00:13:07] Adam: I love that.
[00:13:08] Dan: Or a late night snack from after leaving our bar [laughs].
[00:13:14] Adam: Right, for those open late locations for sure. Yes, and I think when you look at that it’s a much more intelligent way to combat the burger craze, and keep your share, and make your customers happy than creating a burger works chain. I don’t think Red Robin — I know there are smart people there, I don’t think they understood what that challenger ethos was about, and what the fast-casual burger chain is compared to what they offer, which is not fast at all. It’s slow, and it’s leisurely, and it’s family, and it’s the opposite, it’s that experience.
[00:13:50] Dan: Embracing.
[00:13:51] Adam: Right.
[00:13:52] Dan: But that occasions is still occur, and the key is saying, “Where is the erosion and why, and how do we combat that based on everything else that’s going on?” Crop that strategy, and then do what we always tell our clients to do across-the-board in many places. Talk about testing menu, testing, test and optimize. Test and optimize. Use again, use the locations you have, the four walls you currently have to test things before you go foreboding something, and you’re bound to find solutions that are going to have traction and work for you that could be implemented system work.
[00:14:37] Adam: Yes, and in both of the cases, in Jamba Juice, in Red Robin, the way they tried to extend are not things that are in their DNA. The Red Robin experience is about the art on the wall. You have to be sitting in a table to recognize what’s weird about it. You have to sit there and have that experience, and you have to interact with the server a little bit to get the quirk of the place. If you came through fast and just walk through Red Robin, I think it all goes over your head. It’s sitting there and experiencing it you go, “Oh yes, those are Rubik’s cubes,” or, “That thing is made out of crayons.” There’s little details that are important to that experience. That’s what you’re talking about when you’re sitting at that table.
For Jamba Juice, it’s so much of it. They underplay it so much which I think works for them, but it’s watching somebody grab a handful of fruit and throw it in, and then watch him grab the banana which is [unintelligible 00:15:31]. But watching them take all those ingredients it’s very underplayed, but you feel when you get that drink that’s high sugar content is not very good for you. Besides what they add to it, you feel energized just by watching everything that went into its own fruit drink.
[00:15:19] Dan: Yes, I think. Add to that the customization element of it. I can add a protein to it or whatever. However you’d like to customize your drink in that kiosk, there was none of that. I don’t know, I never used one of those or a little bit of that, but it’s not the same. By the way, you don’t have that upsell opportunity. When that cashiers are taking my order, they can say, “Would you like some white protein with that?
[00:16:20] Adam: Right. Or, “How about a Kind Bar?”
[00:16:21] Dan: Yes, exactly.
[00:16:22] Adam: Those little things that they do. That’s a great point. You just brought something up. Looking at these brands and how they expand and another example I think. I look at the Create Your Taste menu from McDonalds. The kiosks that they’re opening inside their own stores where you customize those, and I’ve had the opportunity to try that, and I found the burger to be pretty good, better than an average McDonalds’ burger. I enjoyed the experience although it took a long time to go through the whole thing because I’m slow.
[00:16:53] Dan: You are?
[00:16:54] Adam: Not very capable.
[00:16:55] Dan: That was your first experience, so you were probably doing your own research like, “Okay, so what is this?”
[00:17:01] Adam: I looked at a lot of different options.
[00:17:03] Dan: Actually I missed the fact that you’re a restaurant marketing consultant.
[laughter]
[00:17:08] Adam: Maybe my prison was a little—well, yes. My wife is definitely irritated. But that’s a good extension for them because that’s a way for them to put their toe in the fast-casual burger and the premium burger in their business with ingredients, and things that already hit their COGs, and they’re not freaking out about, “How are we going to sell this?” It isn’t in their DNA, but it’s not a side business either. It’s not now this diversion of revenue, it’s a product, it’s a sub-brand, but it happens inside the arches. Going through it as a customer I didn’t feel taken out of McDonalds. Even though my kids just got whatever; their happy meals they always get there. It’s pretty interesting.
[00:17:49] Dan: Has anybody been successful with this Adam? Did you find any brands selling burgers in one way, and selling in another way, or open a completely different brand for that matter?
[00:18:02] Adam: You don’t see too much. We’ve seen Arby’s adding menu items intelligently. I vowed internally that we were not going to talk about Chipotle, so the jury’s out on Tasty Made, and we’ll see how that burger experience.
[00:18:20] Dan: I can’t resist either. I just saw that — I don’t know if it was Carl Icahn, our activist investor or –?
[00:18:27] Adam: Yes, there’s a lot of action.
[00:18:28] Dan: There’s another guy that’s famous for being an activist that has bought up all more to [unintelligible] on the company and is —
[00:18:34] Adam: Is making moves, that’s all.
[00:18:36] Dan: Yes, a lot going on there. That’s it. Another time.
[00:18:40] Adam: But you will definitely revisit.
[laughter]
[00:18:43] Adam: But you brought up a great example along the lines of the JambaGo kiosk platform. You said you had an example of, we just talked about of a major brand that reformatted but figured out how to keep their experience the same.
[00:18:59] Dan: I did?
[00:18:59] Adam: You sure did.
[laughter]
[00:19:01] Adam: Subway.
[00:19:02] Dan: Subway, I’m sorry.
[laughter]
[00:19:04] Adam: You’re so off. This guy — this is less than 20 minutes ago.
[laughter]
[00:19:08] Dan: I have to tell you, I was not a Subway fan, and that’s just because as you know I am a freaking snob. My wife, who is very meticulous about what she eats and puts in her body, when we travel on the road, like when we’re meeting a road trip, she makes me stop at Subway because she knows she can get that turkey sandwich exactly how she wants it. I like mayonnaise better than that, and since being indoctrinated to that, I have been going to Subway on occasion. I have to admit their product is rock-solid, they evolve the offering. It’s always a Sub, but it is different. It’s a different set of ingredients or combination of ingredients that are intriguing, and interesting, and great flavor profile. I did Subway great kudos for their menu innovation and menu evolution I guess would be the best way to describe it.
[00:21:50] Adam: Yes, well, they do a good job of evolving to trends without selling out the core concept. I can still get the same stuff I got while I was in high school-
[00:21:52] Dan: Yes
[00:22:03] Adam: -But there’s updates to it. They are always bringing in new sauces, and they’re having LTO’s that are trial flavors and it gives you an opportunity to try a lot of different things or just stick to the same thing that you always want, that you always get.
[00:22:07] Dan: Right, and I always thought– the other thing that impressed me about those guys is that. When Quiznos was on their upward trajectory, and their whole point of difference was that they were toasted, what did Subway do? They put toasters in their-
[00:22:09] Adam: I know
[00:22:10] Dan: -It’s hard to differentiate-
[00:22:11] Adam: It’s a machine
[00:22:13] Dan: -Points. It’s a machine that they just completely knocked them out from under their feet with that point differentiation.
[00:22:14] Adam: Yes, I’m glad you brought that up because one of the notes I have is why do these things fail, and it’s, it’s because customers know who brands are. Subconsciously customers who don’t even know what a brand is, know what your brand is. Believe me, they’re your customers, they sniff out a fake. If they are a Red Robin customer or they are a Five Guys customer and they go into Burgerworks; and I’ve never set foot in one, I don’t know what it’s like, but either of those two customer profiles walking in there would tilt their head and say, “This is not the place I love.”
[00:22:16] Dan: Right
[00:22:21] Adam: A Five Guy’s person would not be fooled and say, “Oh no,” okay this is just like Five Guys, it’s just like Smashburger, they’ll know what’s wrong with it right away. I think when we talk about a place like Subway and adding toasters, that’s when the Quiznos’ machine fell apart because customers went to Subway. I actually remember reading a trade article quoting somebody at Quiznos, who said, “It’s not just as easy as putting in toasters. There is an art to it, and how you heat things up and customers know the difference,” they didn’t. I mean it was q1 of that experiment that Quiznos just drew up a hockey stick.
[00:22:23] Dan: It was a machine and a little bit of staff training, you can ask, “Do you want that toaster?”
[00:22:25] Adam: Right, very little
[00:22:26] Dan: Yes, and time to cut up like a major competitor’s point of difference that easily is pretty crazy
[00:22:28] Adam: Right, yes, and then I think they just-
[00:22:30] Dan: I still like Quiznos so-
[00:22:31] Adam: I do too
[00:22:32] Dan: Keep it up, guys
[00:22:33] Adam: I do too
[00:22:34] Dan: Come on, I’m rooting for you
[00:22:41] Adam: Let’s talk about what would it take to succeed at this. If you were going to succeed– if you were going to open a new concept or take your concept and spin it into a new format. Not just a menu expansion, which in itself is gargantuan effort for a fast casual or any scale restaurant organization that’s not easy we know that.
But if you’re going to succeed, there’s a few different things that we look at. Going back to the two examples we started with, with Jamba making a kiosk and Red Robin and their Burgerworks. The ops and the experience that you are creating of both of those places is totally different.
[00:23:43] Dan: Right
[00:23:43] Adam: You can’t expect to take your ops team from your core brand and then just say, “Okay, we’ll figure out the kiosk. Have that done in 90 days, let’s get a kiosk out there and test it.” You need different personnel and I think for this to be successful that’s part of what it takes is not
[00:24:00] Dan: I agree, I think this happens a lot. Just because you’re good at casual-dinning doesn’t mean you could be good at fast-casual or QSR. Likewise to those categories, just because you are good at QSR doesn’t mean you can also suddenly go casual-dining. I think you make a good point about your operation’s team which will have to be very well versed in how to launch whatever category you’re going into.
I think that the key for brands today or companies that are seeking to start new brands, you got to look forward, you got to look five years out, ten years out. Not now, I think too often we look at what is happening now, what I like to call the bright shiny things; the better burger is running its course, right? How many more can the country handle?
Be looking forward, where are flavors going, where are customers tastes going? That’s the kind of research you have to do to identify what the potential is. Again to the extent that you can, it’s more difficult than ever but test and optimize man, test however you feel you can.
[00:24:53] Adam: Yes, I can’t stress that one enough. I think the other thing is, we think about it internally but then we have to think about it externally. We gave Arby’s credit for it, we should give Subway credit for it and even in McDonald’s in the Create Your Taste. Knowing what your customer expects from Red Robin and then knowing what they would expect from a Red Robin express now or Burgerworks as it was called, they’re not the same thing.
That experience is so different, a consumer walking in off the street has a different set of expectations, a different set of ideas, the menu, the feel of the place. Everything from beginning to end is just different. If you’re not looking at it through that prism and trying to understand what they want and what they expect, you will not connect with them, and they’ll be able to sniff out that fake.
[00:25:47] Dan: I still go back to it, if your brand today, that’s fledgling or your challenged and there’s many. We read about them everyday, there’s bankruptcy after bankruptcy, lots of closures. I like to see restaurants closings because that just reduces
[laughter]
[00:26:03] Adam: A number of competitors
[00:26:05] Dan: The number of units which always can potentially help traffic industry-wide. But take a look at who you are, what got you here and reflect on how you can improve on that. Because I guarantee you, the odds of being successful and improving on what you have is much greater than going on and starting something completely new
It’s just is because you have certain level of traffic. Maybe it’s down, but you start traffic. You have a certain level of sales, yes it’s down but you have sales and what are you doing to leverage that? Please please please invest in marketing. Stop cutting the marketing budget, it’s not going to solve the problem, you cannot save your way to profitability. I don’t know about you– if you don’t have a share of my mind you’re not getting a share of my stomach
[00:27:02] Adam: Yes, you can’t be considered if you’re not known, and we’ve seen that a lot. I think the fast casuals get a lot of credit for not doing much traditional marketing but as you dig into it more and more, we know that that’s not true, they’re marketing in different ways, and they’re finding different ways to get their share of voice up and get their share of awareness
[00:27:23] Dan: Yes and who’s testing TV. Our friend’s spotlight have been around TV before so
[00:27:28] Adam: They’re back
[00:27:29] Dan: There you go, and prove positive.
[00:27:32] Adam: Alright, well, I think that just about covers this conversation but we’d love to continue it with anybody listening. If you have more thoughts, questions, ideas or challenges, please you can find us on Twitter @FandRM. You can also email either one of us, dan@foodandrestaurantmarketing or adam@foodandrestaurantmarketing. Or both of us and more of the team at info@foodandrestaurantmarketing. Please subscribe and share this podcast with your friends, we appreciate it.
[00:28:00] Dan: Eat well.
[00:27:53] [END OF AUDIO]

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Transcript of Food & Restaurant Marketing Podcast – Episode: The End is Nigh

Transcript of Food & Restaurant Marketing Podcast – Episode: The End is Nigh

[00:00:07] Adam Pierno: Okay. Welcome back to another episode of Food and Restaurant Marketing. With me as always is Mr. Dan Santy.

[00:00:16] Dan Santy: Hello.

[00:00:17] Adam: I’m Adam Pierno, your loyal host. Back and better than ever. We are talking about a subject today that’s a little more somber than usual. More important than I think a little more serious than some topics covered on the episodes we’ve shared so far. But this is a very important one, everybody who is listening and everybody in this business and beyond, probably. We are looking through the data. We’re starting to help a plan for 2017 for a lot of brands. We’re looking at the economic forecast. We’re seeing some statistics that tell us that there’s the headwinds that we’ve been dealing with may be something more than just strong headwinds. The question we’re asking on the top of this episode is, are we going into a restaurant possession?
[00:01:07] Dan: Good question mate. I’m going to share a few facts with you that I gathered here. About a month ago, maybe even a little longer. Six weeks ago, I was talking to more like friends and his financial planner. His prediction was at time, they were thinking that recession is going to hit latter part of seventeen. But just recently, my own personal financial planner who manages my nickel.
[00:01:39] Adam: [laughs] He’s going to get it up to six cents. This is the year.
[00:01:43] Dan: …actually, took me out of the market on several stocks which I thought was very interesting, very proactive thing on this part. This is the market at 18,000, it’s at its peak right now from its low. He was worried about a correction. Then you can’t deny the fact that we have the lowest interest rates in 60 years. That can’t last. Those interest rate, we know the interest rate is going to go up and is going to have an effect with the economy.
[00:22:15] Adam: Yes. And especially for brands like restaurants where there’s a lot of commerce, a lot of trades, a lot of products, and a lot of ingredients to be bought, a lot of staff to be trained and hired. We know that there’s a lot of money changing hands and those small chains of interest rates and small moves, micro moves in the economy make a huge huge difference.
[00:02:34] Dan: Yes. Because we are looking at — obviously the restaurant spend isn’t discretionary spend. The first thing that can be adjusted are for any family.
[00:02:46] Adam: Yes. If you look at some recent reports and recent information that’s come out, or seen that the census has estimated now that monthly sales for food service operations are down month over month again. September from August, and August was from July as well. That trend downward monthly sales just continues there. Black Box and their parent company showing a continued downtrend from most of the restaurant industry in the chain members. We see that just that, on its current pace and that may change. But today, we’re just seeing it dip and it’s looking somewhat similar to 2009 and I think we know what was happening back at that time period.
[00:03:33] Dan: Right. For us today, we wanted to do this podcast today because typically, our clients are talking about, “Oh my gosh. What are we going to do and become very reactive when the recession hits or if we’re in the middle of it?”
[00:03:52] Adam: Well, when they hear there is a recession, which you astutely pointed out, is when we’re already six months to a year into it. It’s usually when the media says, “Hey, we’re in this.”
[00:04:02] Dan: Exactly. Then all of a sudden there’s this reaction and the number one thing that I want to talk about for a minute Adam is, what do you do with your marketing expand at that moment in time? All too often we know the story. It’s you cut, because it’s instant savings. Right? It looks good to the private equity owner or whoever your ownership proof it it’s. But we also know that, statistically year over year, decade over decade for that matter, the brands that stay consistent and spend during recession, through the recession, actually survive it well and come out of it faster and better. That’s my message today. Let’s not wait to make the strategy decision about our stand when we’re in a recession. Let’s make a strategy decision today. I think that brands in need to be smart about this because once again as you know, I preach this all the time. Share up mine, which is awareness, equal shares of stomach. You are going to get my share of stomach if I’m aware of you and I’m hearing hearing about you. Because I can damn make a decision about your LTO, or I can make a decision about your brand, or whatever the product may be.
[00:05:25] Adam: Yes. Let’s talk about a number of factors here. Because you’re right. We see that the brands that cut. The easiest place that it seems to cut, or it’s not going to hurt food or operations is marketing. But we know that again, when awareness goes down, traffic goes down. We see the direct correlation. Consideration is a direct line to traffic, and therefore sales. We know we have to cut. Let’s talk through a little bit of how to do some belt tightening, without just jumping to a giant line item which unfortunately as what we’ve seen and witnessed going in to the last, the great recession where a lot of brands has never recovered the way they have gone in.
[00:06:06] Dan: I love this question Adam. Absolutely [unintelligible]. You know what? I’ve been working with some really really smart analysts here at Food and Restaurant marketing who are looking at the data of many of our clients and say, “What’s working?” And, go back to that test. We test and optimize, that is the approach that we take with spending. We have great intelligence about what is working today. We have intelligence about what’s worked within the side recessions. Let’s go retreat to those tactics, because we know that they work. And, guess what? We can use them when it’s time and we can continue the test and optimize. Does it hold water? Right? Is it performing as well as we’ve seen it perform in the past? At least you could know, but we mean that you’re using a tactic that has been successful in the past. Now you have to pay attention to it and to make sure it continuously successful for you. But use the intelligence you have. That’s my message.
[00:07:16] Adam: Yes. What’s key is having a plan? You can now be looking at your — We’re talking about this now, so you can be looking out six months. This is the time to be auditing your menu performance and your makes and say, “Okay look.” Based on sales today, based on traffic today these are the items that are bringing people in, and this is what cards are and if it’s driving traffic, if it shows up frequently at a good margin for us, we keep it on the menu and these other items that we’ve been holding onto, this might be the time to cut up. Right now going into 2017 we see that cheese is still going to stay low in price. We don’t have to look at cutting cheese, let’s find new ways to use cheese. We know we can get it cheap, you can go into this situation we’re in. As we are looking at commodities and we are looking at ingredient, let’s really be smart about how do we change the menu and start making those moves and do that. If we’re looking at economic trends, let’s also look at consumer trends, right? So we see that consumers right now if you’re talking about millennial specifically and I know everybody is sick hearing about millennials.
[00:08:23] Dan: God knows I am.
[00:08:25] Adam: Yes. But they drive trends north and south. Because they’re the primary group and because they are right now on the sweet spot of maturity and discretionary income, they drive trends for gen-X and bloomers because they are willing to try things and then tell people. The trends tell us they want bold flavors and they want diversified flavors. Okay. How can I look on my menu and take the existing items I have and add items without adding any new commodities, besides sauces maybe? Or just changing up sauces that I already have so, I already sell this sandwich that’s a killer. Okay well, let’s add Sriracha to it or even a non-licensed version of a bold pepper sauce. How can I do that and bring that flavor? Something just to combat, having it in my back pocket as an LTO that I can come back when prices start getting really serious, and competition gets really rough when this recession hits. If it hits like it looks like it will, I can pull this out of my pocket so this is going to be on trend. It cost me no more money than what I’m doing now and it’s going to drive few traffic.
[00:09:30] Dan: You hit on a note there that I’m a huge fan of and that’s the LTO, Limited Time Offer because — Especially when it comes to a menu item like that and it’s new, it’s unique, it’s different, it’s a point of differentiation without having to ship to all brand strategy. It’s a menu item that people will hear about, discover and say, “Wow, I want to try that” and becomes a reason to come in, or come in again. Or in recession environment, it’s the reason that I’m going to your brand which is another brand. That’s just the same old thing, and I’m not doing anything because I’m resting on the rules that I’m going to come in for what I typically come in for in the past. The LTO is a really smart strategy and by the way, real quick side bar note that Adam taught me this years ago, the LTO doesn’t necessarily need to be a discount. The limited time offer could be a bundle that is the same price as if you bought all three of those items separately, but the perception that it’s a good value, how you present it, consumer’s not going to care. They’re going to say, “Hey, that’s sounds like a good value to me,” and it helps you steal share from other brands.
[00:10:48] Adam: Yes, really in a recession environment, you’re just trying to keep traffic flat and start stealing one occasion here and there from competitors and figuring out ways to do that. Any news you can generate, will help you do that, it’s going to help you stay top of mind because we know from the last recession that people will start changing their habits. We refer to that one — I refer to it as the L-shaped change in dining. The Millennials never came back from that last recession, dining out as much as they did before and every year that we’ve asked them, since that we do research here, primary research, into Millennials and other cohorts, almost every single study we’ve done and every study we’ve seen the respondents for that say, “I plan on dining out as much or less next year as I do this year.” There is no group in this country that says, “No, no, next year’s the year I’m going hog-wild. I’ve got all this money to spend.” We’ve been all trained by the recession, the great recession, to just be a little bit more mindful about our money. Value is very involved. Being smart about our money, in style, and that’s a dangerous thing for restaurant brands where I just need you to come in and have a meal and just be open-minded about buying an add-on item or having an extra drink or doing — having dessert and not just come in with a coupon and try to get your $1.50’s worth.
[00:12:09] Dan: I am so glad you brought up a research variable because one thing that does not change, regardless of the economic environment is that people have cravings, and by the way, I’m convinced that cravings — so making your product craveable, may actually be the most powerful during a recession because I’ve actually cut back on some things. I’ve given up some things — a lot of things that I was doing before and splurging on and treating myself. I’m still going to be working by butt off, I’m not — as a consumer and I’m still going to want to reward myself. Those things don’t go away, you got to thing about that emotional reward of getting themselves very craveable and introducing the valued proposition for it, and again, steal share man, it’s your opportunity. Get aggressive, steal share, and you’re going to come out the opposite end, because we all now recessions end, and who comes out the winner and who comes out the loser has a lot to do with how you behave during the recession.
[00:13:22] Adam: Yes, right. You can earn a lot of credit, and I do think you’re right about craveability. Because you’re going to be making those cuts as a consumer, and you want to feel that you’re keeping some indulgences in your life and even the thing that today, pre-recession, I eat twice a week or three times a week. When it gets time, when I cut down to once a week, I want to make — I want to feel like, “Oh, this is something extra I”m doing. I’m getting this little extra thing off, taking my family to this place, and having this extra nice meal and this thing that my wife’s been craving.” You got to build that up and you can actually start that today that really when we speak to craving, it’s just — all it is is paying a little extra attention to your food photography, food video, the presentation of your food, plating, small details that you can do.
We know that food video can be exorbitant in price and we know that there are guys that are table-top shooters that are very expensive. You don’t have to do that, especially today in the digital environment. There’s ways to do it just by adding a little bit of lighting and a little attention to make the food seem extra craveable, and really figure out what is it. Talk to your customers, ask them, “Why do you love this item? What is the detail about it?” Then really hone in on that.
[00:14:36] Dan: Right. Speaking of messaging, the message you were talking about, in this case you’re talking about visual messaging, and you know me, I’m a huge advocate of television, I’ll probably go to the grave that way.
[00:14:48] Adam: On television.
[00:14:49] Dan: On television, yes.
[00:14:50] Adam: Yes, and have a funeral, a royalty or something.
[00:14:53] Dan: I hope so, but you can use the written word to create cravings. If it is a visual tool that you’re using, a video or something like that, and enhance the craveability, not only the visual but the words you use. But if you’re doing audio, so maybe you’re doing Spotify or even linear radio, make sure that you are describing that food in a way that people are just like, can visualize and go home and, “I need that,” whatever that may be.
[00:15:29] Adam: Yes. I think another thing to consider right now with costs, is going to be staffing. We know that nationally, there’s going to be pressure, tremendous pressure on staffing, on hours management, full-time employees and a different set of circumstances, State by State. We know that that pressure’s going to change, and now in light of the pressure you’re going to have in sales and traffic, how are you going to manage that? I suspect we’ll see some organizations cutting staff in front of house and server staff, how is that going to affect customers? You have to be very mindful about your operation and what the output is for the customer. Just cutting one shift of a server at a rush hour time, does that ruin their experience? Or does it just make it a little longer? What can you do to fill that time at the table and be mindful of that now knowing you may have to make those cuts?
[00:16:21] Dave: That’s a great point which leads you right to training. Take the recession variable, so everybody’s being affected, who, more than that casual dining server, right? Because so, occasions are down, sales might be down because we were still going out and spending less, so that means my tip – my tip wages are down. That’s when training, which is not terribly expensive, and training them how to up-sell, training them how to create a great experience, so actually there’s a repeat visit. And to your point about — if you are trimming staff and you’re cleaning out, make sure you’re filling that void with something. Whatever it is, surprised and delight moment of, “I know you’ve been waiting, I’m sorry. Here’s a-”
[00:17:14] Adam: Train those in.
[00:17:14] Dave: Train that right in. Absolutely, and you can use this environment as an opportunity actually and not just go, “Oh,” I’ll throw up my hands. You know what? You cut my staff and therefore, service standards suffered.”
[00:17:31] Adam: Yes. Unite with your other operators and figure out how to get that training built in and do it now, proactively. The next thing you might want to start thinking about is, if you don’t have a loyalty program, we’re not — it’s very funny, Dave and I are on the fence about loyalty. It goes concept by concept, whether it makes sense or not, how it’s executed makes all the difference, and it’s really part of the bones of the brand, whether it works or not. But this would be a good time to examine. If you don’t have a loyalty program, should you start one? Do it now and start testing now to figure out when money is tighter for consumers, how are you getting them to be loyal? Or if you have one, how are you testing it now? How is it performing? You want that thing to be absolutely humming at a Starbucks level to make sure that when the rubber meets the road and times get very tough, this thing is another tool that you can pull out to start adding in perks and adding in benefits to start driving some traffic. And again, we are not proponents, one way or the other of loyalty, it goes concept by concept.
[00:18:38] Dave: As a matter of fact, that sounds like a great podcast.
[00:18:41] Adam: Yes. That’s a future episode, I have a feeling. I have a feeling we’ll be doing that one.
[00:18:45] Dave: Absolutely. One other item I want to bring up today Adam, is targeting. You mentioned Millennials earlier –
[00:18:54] Adam: You talking about Media, Media Targeting?
[00:18:56] Dave: Yes, audience. What audience are you after? You really want to, again remember we’re talking about a recession environment. Who is less volatile in a recession environment? More than likely it’s going to be the Boomers. They’re at their highest earning or they’ve burned out or they’re living off a healthy package in their early retirement, whatever the case may be. I think the Boomers are — they’re just being ignored and I think it’s an audience that you should seriously look at. Ask yourself, are your media plans touching them? If they are, is it enough? What can you do to invest more dollars there without undermining your core audience? If it’s not Boomers, I’m not telling you to abandon your core or go to a Boomer, but you need to think about these things because these are the kind of details you dial in five, six, or seven of these items that we brought up today, you’re surviving. You are — you’re not surviving, in my opinion, you’ll be thriving.
[00:20:10] Adam: Right. If you just do a little bit of planning now. I think you’re dead on about the Boomers and if you get that upper-middle Boomer that has — whether the storm from the last Great Recession and maybe is now in retirement age and they’re off and running. They’re not going to feel the pinch of a couple of bucks at your restaurant. They’ll be okay and they’ll come in. Earlier, we spoke about shifting trends that make sure you’re hitting that Millennial. But again, the trends that are set by Millennials, the Boomers are on top of those things. They lag a little bit, but when they see it being consumed and done by their kids, they get on board and they want to try it, too. I think you can–
[00:20:50] Dan: Oh, my gosh. All day long, and it cuts across so many categories. I hear a good friend of mine, he’s 70 plus years old. I’m not that old, by the way.
[laughter]
[00:21:00] Dan: I just happen to have an old friend. He talks about bands today, which crack me up. I know darn well it’s because his daughter or son were saying they love this band.
[00:21:13] Adam: This is somewhat off-topic, but look at the Superbowl. The Superbowl has to get an act in there that appeals to, essentially, 250 out of 350 million Americans, and so they’ll bring in an act that is Millennial focused and then the Boomers catch on to it. They love, Bruno Mars, now. Before they probably were waiting for, The Red Hot Chili Peppers, they’re more aware of them and, now, they’ve caught on, “Oh, this guy’s in town. Okay, now we’re off and running with him”. Just as an example, you can take something that’s got broad appeal to Millennials, which is harder and harder to do as it’s getting more and more fragmented to reach any huge group, and you can take it and port it out to another demo.
[00:21:57] Dan: Yes. Agree. Agree.
[00:21:59] Adam: I think we’ve pretty much covered this topic. There’s so much more to dig into, but without getting into some really boring economic theory. That’s our sister podcast, Food and Economics Reality, which has almost no listeners except my mom.
[00:22:15] Dan: [laughs]
[00:22:16] Adam: If you have more thoughts on this, questions, if this made you spark any kind of ideas that you want to talk through or maybe another episode you’d love to hear, please, reach out to us: adam@foodandrestaurantmarketing or dan@foodandrestaurantmarketing and, please, hit us on Twitter: FandRM or get to the bottom, leave us a comment. We appreciate you listening.
[00:22:38] Dan: Eat well.

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