3 ways to maximize LTOs using scarcity bias

Limited time offers (LTOs) are effective because people believe they won’t be able to have that meal after a certain period. This activates a mental state called scarcity bias. Airline websites are the best at activating scarcity bias to sell a reservation. You’ve no doubt noticed the call out reading “Only 2 seats left at this price,” which creates an urgency for you to book before the person logged on across town does so first.

scarcity, traffic, demand, brand
Only 3 left at this price!

McDonald’s has an annual goldmine in the McRib. By offering it each year as an LTO, they create excitement and demand that wouldn’t likely be sustained for a permanent menu item. Consumers have told us they don’t plan much for most of their dining occasions. The LTO has to earn a date on the calendar for your brand.

Most restaurant brands intend LTOs to drive traffic in a contained window. Either explicitly or in small type, they’ll identify that is is available for a limited time only. But the assumption is made that consumers register the expiration date on the offer. Without that information, it is unclear that the offer is scarce.

1. How long is limited?

As consumers continue to be buried in ad messages, it gets harder and harder to retain information. When preparing ad communications for an LTO, marketers tend to look at the pieces in a vacuum. Consider all the noise around the piece. There are several key facts that the viewer must take away to be drawn in. First and foremost, how long is limited?
Most brands hide the end date. Test making an end date visible. Consumers will have a timeline to fit the offer into their schedule.

If the offer goes ends up exceeding the end date, it can always be messaged as a positive. Extended due to popular demand.

Be aggressive about reminding your audience that they might miss their chance to try this or have it one last time.

2. Make LTOs special

There are unlimited options. Every day, people can get whatever they crave. It’s important that your LTO has something unique in the market if you want to capture new customers. How unique? Unicorn Frappuccino different. Getting attention isn’t easy. If the brand is focused on scarcity as a strategy, create something hard to find.

If the offer is intended to earn extra visits from current customers, the offer can be something a little less out there. But it has to stand out enough to draw interest and make them put a date on the calendar.

3. The end is near

If every brand were buying network television, this would be terrible advice. But with digital and social channels, updating creative with reminders is affordable and effective. Now that the end date is clear, be bold. Add a count down to digital creative. Be aggressive about reminding your audience that they might miss their chance to try this or have it one last time.

Not ready to be so bold? Test count down messaging for your next offer exclusively with paid social. It can be targeted to a specific area – from a DMA to a single store. This test can inform future approaches and expanded based on results.

Another Challenging Year for Restaurants

If you thought 2016 was challenging you better hold on. 2017 is not poised to get better. Even with Republicans controlling both the Congress and White House and the opportunity for reduced regulatory burden on businesses, the outlook is tough for a host of competitive reasons and a continued over supply of eateries.

Chicago-based NPD expects restaurant industry traffic to remain stalled in 2017. Traffic to dine-in brands AKA casual dining, will continue to fall at a rate of 2%. They do however bode slightly better for quick serve brands with traffic projected to grow 1%, hardly a panacea in light of the expanded competition from grocery. And to further cloud the traffic picture, gas prices are projected to continue to rise again.

Innovation is critical to continued success and a way to stay competitive.

Consumers’ apetites for dining out continue to be stymied by the prepared foods industry. And the competition is not just coming from traditional grocery stores. Increased options and improved quality at C-Stores will continue to provide viable options for consumers. Take into consideration the attractive value proposition of better quality, more options, less expensive and convenience and you have a cadre of tough competitors for share of stomach.

So what’s a quick serve and any dine-in brand to do? First and foremost make sure to deliver on the basics. Create superior dining experiences. Immaculate restaurants and food quality are ways to win consumers for that next dining out occasion. Our research shows how important the customers the last visit plays into future decisions on a return visit to the same brand. Training or retraining staff to surprise and delight the customer is an inexpensive way to deliver that superior dining experience.

Innovation is critical to continued success and a way to stay competitive in a challenging environment. And I’m not talking about building an app. App downloads are down significantly as people are demanding apps that provide utility and it’s unlikely a restaurant brand can provide the kind of utility Uber provides, which is the standard by which most apps are judged. Instead, consider innovation on your menu with flavors from the season or capitalize on popular flavor profiles that consumers crave. Millennial customers are fond of bold interesting flavors you can’t find just anywhere.

Test different options in a few units before rolling out to the entire system. Our research show customers love the opportunity to weigh in on what their favorite brand is testing. Utilize a high performing store with a strong manager, this guarantees a meaningful test that can be replicated over and over. It also helps refine the preparation and presentation for a highly effective roll out.

We are also seeing technology playing a key role in innovation. Although probably the more expensive route it’s necessary to stay ahead of the curve on collecting critical data to analyze and leverage to better understand your customer’s habits and behavior. Once you know who your best customer is and what they like you can leverage that information to go get more of them.

Mobile ordering is growing exponentially and if having that feature makes sense for your brand make the investment. We are seeing many brands generating significant incremental sales and ROI on mobile ordering by leveraging intelligent upsell opportunities.

It’s not the apocalypse but these are challenging times for restaurant brands and prepared food in general. You’ve been in business a while now and you know it’s cyclical. Stay focused on the fundamentals of delivering great hospitality. Innovation is critical to staying competitive and technology will keep you ahead of the change curve.

Changing beverage habits and sales erosion

Some long gestating changes to American behavior have taken root in 2016. The beverage category looks much different today than it did 15 years ago. Sales of giants Coca-Cola and Pepsi (and their endless list of owned brands) have been flagging. Though they have found innovative ways to gain bumps in sales, it appears that new habits may be leaving those brands behind. The CPG space has already reflected these new behaviors which are now impacting the dining space.

According to NPD Group, soft drinks are still the number one consumed beverage on-premise. Coffee ranked number two. It appears that tap water is cutting into the purchases of both of these. But bottled water is the fastest growing segment of beverages purchased with meals. Orders of tap water indicate cost sensitivity, but increased sales of bottled demonstrates people making a choice. They are choosing fewer soft drinks.

Government programs raising costs won’t help. Sugared beverage taxes increase costs for both customers and restaurant operators. Tax programs have expanded to five more cities this month. State programs like these take aim at cost sensitivity to change habits towards sugary soft drinks, but may have further reaching consequences.

Sugar isn’t the only problem. This summer, it was reported that alcohol sales have dropped for the third straight year. The Beverage Information Group reported that sales had dipped again in volume though revenue remained mostly flat. This reflects a move to more premium or craft alcoholic beverages.

The introduction of the Coca-Cola Freestyle machine differentiated restaurants and spurred drink sales for a while. But this has faded.

Assuming this trend continues, a move away from premium beverages would be another hit to same store sales. That becomes even more important when you layer on research from Upserve. They analyzed thousands of checks from their POS system. Guests who ordered alcoholic beverages are more likely to order dessert. About 75% of tickets with alcoholic beverages also included dessert. Red wine had the highest correlation to a dessert item. This tells us that as average check drops from lower alcoholic beverage sales, desserts and other items will drop as well.

Obviously, fewer drinks ordered immediately reduces average check. People choosing tap water take revenue away from restaurants. So understanding why is important. Guests have never had more options for beverages. It will be difficult for restaurants to both stand out and to predict the favorite of every guest.

The introduction of the Coca-Cola Freestyle machine differentiated restaurants and spurred drink sales for a while. But this has faded. New approaches are needed. For most brands, beverages are an afterthought. The time is right for innovation with beverages.

Go small.

This might be the time to test offering craft beverage makers exclusively. We sell what guests want. They are buying less of big brands. Test programs bringing small producers to your guests. The drawback is finding partners to match your brand footprint, and meet your demand. Obviously, Pepsi and Coke have distribution covered no matter where your restaurants are. This might be an opportunity to work with new distributors to uncover brands on a regional basis. Using small or local partners also aligns with the trend of anti-global consumerism.

Explore drink LTOs.

If your concept allows for it, consider rotating your beverage options. Dedicate one of your pours to a revolving drink on a limited basis. This will create some interest in the drink menu and vary experiences for returning guests. This is an important part of the experience curve. Pricing these attractively will also spur interest and get guests back in the habit of ordering that beverage.

BYO Beverage.

One way to counter the swing-and-a-miss of choosing the wrong small beverage brands is to create your own brand. Guests are already there, they will be receptive to trial if you can make your drinks compelling. Try flavor combinations that really compliment your food menu, even specific items. Make drink options that are fixed or recommended parts of combinations. This is another way to extend your brand and differentiate from competitors.

Finally, train your staff to offer a drink with each transaction. Whether it’s a server at the table or someone at the register. Just asking if guests would like a drink is often enough to remind them that they actually do.