Every day it seems that there is a new viral sensation sweeping your social media feed. No, not the latest OK Go video, DJ Khaled snap or Kardashian whatever they do. Think food. First it was the Pinterest-ready cupcakes rendered in beautiful pastels. The next big thing was macarons. Then the cronut became a standout solo hit. Giant pizza slices. Brisket burrito. It feels like these new items hit the internet daily. Because they pretty much do.
Each new item attracts visitors to the restaurant, along with Likes, shares and clicks. And most of these items are the creations of independent restaurants. But major brands don’t fire off crave-worthy novelties at the same pace. Sure KFC had the Double Down, and now sister brand Taco Bell has the Naked Chicken Chalupa (look familiar?). But by-and-large, these items are few and far between.
They usually play like novelties invented just for the press release. Gimmicks like the Panera Bread “secret menu” attempt, designed to ride the success pioneered authentically by some brands but ultimately falling short. Outback Steakhouse’s 3 Point Bloomin’ Onion (topped with cheese fries and steak) was clearly built to get media attention. It failed to gain visitors because it just doesn’t look that good to eat.
Many viral hits across media are remixes. Music, movies, even viral videos about remixes.
For the restaurants that create the Sushi donut, initial traffic crashes the place. Traffic is the goal of major brands as well. But independents, strapped for resources, fail to capitalize by moving those there to try the viral hit onto more mainstream menu items. Major QSR, Fast Casual and Casual Dining brands have the R+D departments but somehow fail to innovate.
So, what’s different?
The Double Down success was as much a product of its curiosity inducing form as it was the media buy that gave it visibility. It was never intended to be a mainstay on the menu at KFC. But it also failed to create serious levels of demand, unlike the buffalo chicken chimichanga. These are the items that younger guests seek because they’re not only looking for unique food experiences, but they’re looking for things to share on social media.
Taco Bell is well positioned to launch a string of viral food hits. They have the food oddity gene in their DNA by virtue of the co-opted nature of their Amexican cuisine and history of flavor combinations like the Doritos Locos tacos. Taco Bell also has the top viral audience coming in daily. And now for Waffle Tacos. So why aren’t sales continuing to rise?
The food that goes viral have something else in common. Like Taco Bell, they are remixes of popular items. Sushi and Donuts for example. Unlike Taco Bell, they tend to cross culinary lines that brands locked into a corporate flavor profile have trouble finding. The cronut, maybe the item that started the viral food trend, seems simple. But French pastry techniques and good old deep fried dough had never been cross pollinated, despite sitting next to each other on New York City bakery shelves for decades.
Many viral hits across media are remixes. Music, movies, even viral videos about remixes. Fragmentation has rendered mass attention harder than ever to earn. Artists and media seek to leverage known properties, or very, very familiar ideas to draw a bigger initial audience. The easier it is to explain, the bigger the audience opportunity.
In light of the change in culture, brands need to find their own Sushi Donut that will attract initial attention, drive trial and allow for menu exploration down the road. Mixing favorite flavors is one recipe for viral success. Creativity doesn’t have to be original to be successful.
[00:00:06] Adam Pierno: Welcome back to another episode of Food and Restaurant Marketing. Once again, with me is Mr. Daniel T. Santy.
[00:00:18] Dan Santy: Hello.
[00:00:20] Adam: We have a fun topic today because we are experts in restaurant marketing, but we are also consumers of restaurant marketing. This topic came up pretty organically over the long weekend with some exchange of some texts and some kind of quippy humor, and also sparked from a conversation about a post that we published a couple weeks ago about a brand that you might have heard of. It’s a new upstart. What’s it called again, sir?
[00:00:48] Dan: I think it’s called Starbucks.
[00:00:51] Adam: That’s correct. That’s correct. Yes, Starbucks. I always get it mixed up. It is a fantastic brand and we will definitely link to the original post that relates to this, although is not 100% related to this conversation, but they’re loosely siblings to each other, I guess. It’s interesting because I got a text from Dan and we both kind of shared a chuckle. Go ahead and tell them what you sent me.
[00:01:19] Dan: I was in Instagram, my Instagram. That’s a social media platform.
[00:01:37] Dan: Get a tall and a breakfast sandwich for guess what price point; five dollars, the famous QSR price point.
[00:01:45] Adam: The five-dollar-foot-long.
[00:01:46] Dan: Yes. It’s been around forever now.
[00:01:48] Adam: Yes, and I was pretty surprised too. The visual did not lead with the coffee. The coffee was background to the breakfast sandwich. If you changed the colors out, it could’ve looked like a McDonald’s ad.
[00:01:58] Dan: Right and they were pushing breakfast exactly as what the occasion that they were driving. So, I found it very interesting and then it wasn’t too much later that day that I was watching television and here comes a 30 on the same promotion. So, breakfast at Starbucks, five bucks, sandwich and a tall coffee.
I was so fascinated because the brand really hasn’t used television very extensively number one. Number two; when they have used it they’ve really promoted more their high-end brand or clover or different high-end beans and so forth, which makes sense because it’s on brand with who they are and who they’re continuing to want to be as a luxury brand. But to see them pushing a five dollar price point was fascinating, I thought what was equally fascinating is when I toured three stores only to discover that there is no POP in the stores; zero.
[00:03:01] Adam: We had some fun with the media that you saw on Sunday or Monday, but that was the big aha. I went into Starbucks today for another points challenge because I’m addicted to that game. I was looking around too knowing that you had seen all that media, which I haven’t seen anything, but when I opened up the app walking into the store, there was a promo for that same offer. In the store, though, I didn’t see any POP. The POP was still classic Starbucks, like high-end very brand–
[00:03:32] Dan: Yes, they were selling some latte [unintelligible 00:03:37]
[00:03:37] Adam: Yes, they have a new one that I can’t pronounce either [Editor’s note: It’s called Cascara]. I’m not even going to try.
[00:03:40] Dan: Right. [laughs]
[00:03:42] Adam: They always have a new latte that they’re pushing it seems like.
[00:03:46] Dan: I guess on the surface, I was startled because I thought, I wonder what’s happening from sales perspective. What’s the strategy behind this LTO if it’s indeed an LTO? Is this something they’re going to continuously push? But because they’re going head to head with McDonald’s obviously, and their huge push and huge success, I know Subway’s now doing breakfast. BK is doing breakfast.
[00:04:20] Adam: Taco Bell.
[00:04:20] Dan: Jack in the Box
[00:04:21] Adam: Everybody now is getting into the breakfast day part. [crosstalk]
[00:04:23] Dan: Yes. So, I guess you could argue based on that, that maybe all those brands were beginning to erode-
[00:04:31] Adam: Do you think? That’s my question.
[00:04:31] Dan: -traffic at Starbucks.
[00:04:33] Adam: It has to be a defensive move, right?
[00:04:36] Dan: Right.
[00:04:37] Adam: It has to be.
[00:04:37] Dan: Absolutely, yes.
[00:04:39] Adam: Because otherwise– that’s the day part they’ve been trying to build off of. They closed down their wine test that they were doing. They just shut that down kind of overnight. They gave up on that evening day part, which it was a noble effort. I wouldn’t have been surprised if they could’ve pulled it off, but maybe they’re just retrenching about on their craveable core like we’ve discussed in the past.
[00:05:02] Dan: Yes. I should’ve ordered it, to be honest with you.
[00:05:05] Adam: Just to see what the experience was?
[00:05:06] Dan: Yes, see what the experience was and to see if they even– to see whether the staff, the barista even knew about it.
[00:05:16] Adam: If they knew it was an offer or a special or something worth talking about, or if they just wrung it up and gave you a microwave sandwich.
[00:05:21] Dan: Yes. I also wouldn’t mind tasting it to see if it’s– to see what the quality is behind it, too, because I have a– excuse me, I have a high expectation for quality there. Food’s a risky business especially when you get it out of the package. I think they’ve done a good job with their packaged product that they have. You can pick up that snack box, obviously, the yogurts and some other things like that. But all over sudden when you’re doing prepared items that are getting microwaved, you just want to go–
[00:05:56] Adam: It’s not a good look. I don’t order the food there for that reason. I see them unwrapping it and I see them putting it in a microwave and it doesn’t feel like you’re saying. It doesn’t match my expectations of the high-end experience. I wonder how they’re planning to address that going forward or if they– I guess it doesn’t seem to bother them too much.
[00:06:17] Dan: Yes. It’ll be interesting to see what they do. Clearly, there must be a traffic issue.
[00:06:23] Adam: It’s got to be and to drive traffic to an item like food where they know there is a potential for a disconnect in the experience, that’s pretty interesting move, but it’s got to be a traffic and upsell move, right? Five-dollar combo?
[00:06:38] Dan: I guess, but think about this. Their margins on a latte are ridiculous, right? They’ve got to be.
[00:06:46] Adam: Right.
[00:06:46] Dan: So now all over sudden, your sending me to get a sandwich and we all know food and paper cost. Now, all of a sudden, you’ve got a whole another dynamic and food’s so much more expensive and the margin on food is difficult and you’re giving me a cup of coffee for five bucks. It’s a interesting play all the way around.
[00:07:06] Adam: Well, yes. It was a tall coffee. When was the last time you ordered a small coffee anywhere? I don’t think I’ve ever ordered a small coffee.
[00:07:15] Dan: Yes. No, I haven’t either.
[00:07:17] Adam: So, you’re upgrading that and contributing to the margin?
[00:07:20] Dan: You think maybe I’m getting that sandwich, but saying give me a Grande?
[00:07:24] Adam: Yes, or you’re turning that coffee– I think that’s a drip coffee. You’re turning that into a chai or something fancy.
[00:07:29] Dan: Maybe.
[00:07:30] Adam: You’re a fancy gentleman.
[00:07:31] Dan: I am very fancy.
[00:07:32] Adam: For sure.
[00:07:33] Dan: That’s interesting, Adam. I never even thought about that. I wonder how they would price that. We ought to test that. I want that five-dollar special, but I want a Grande.
[00:07:44] Adam: I bet you that’s what the baristas– if there’s any training, that’s what they’re trained to do. You sure you want a tall?
[00:07:48] Dan: Yes.
[00:07:49] Adam: You sure you don’t want a venti?
[00:07:50] Dan: Yes.
[00:07:51] Adam: Right? You sure you want a–?
[00:07:51] Dan: Or a Latte.
[00:07:52] Adam: Right, and just, “Cha-ching, cha-ching, cha-ching.” Because when you think about the original brand promise, when you were introduced to Starbucks, you weren’t introduced to it at a QSR level at all. It was this special experience. It was experience coffee.
[00:08:11] Dan: It’s experiential.
[00:08:12] Adam: The coffee house experience.
[00:08:14] Dan: Right. The whole concept was to come on in, relax, as you pointed out in your article, get yourself a cup of coffee, sit down, relax, visit with friends, use their free wi-fi–
[00:08:26] Adam: Spend time.
[00:08:27] Dan: Yes.
[00:08:27] Adam: Spend time, but now the question that I’m asking is with– you start out with this exclusive experience. You start out with this perceived luxury where I feel like I’m treating myself. Now, we’ve moved so far towards mass acceptance. I mean, there are honestly places where– who we were just talking to that was telling us there was a place in Portland where there were three Starbucks on a four-corner street?
[00:08:52] Dan: Yes, exactly.
[00:08:55] Adam: They’re so mass, it can’t still be luxury. So, now when I see QSR messaging, I really get curious about what they’re thinking about strategically inside there.
[00:09:06] Dan: Yes. I think that they’re probably– there’s got to be stress. There just has to be stress. The brands matured significantly. There’s so much competition especially from the independents. Let’s face it; the hipsters, the Millennials, they tend to really like to support local. There’s about a push for local. American Express does that at the holiday [crosstalk]
[00:09:37] Dan: Small business. So, all of a sudden, there’s a lot of push-back for a big massive chain like that and the ubiquity of it.
[00:09:46] Adam: Well, let’s take that fork in the road. Would you expect then because I’m thinking of places locally around here like Cartel or other places here in Arizona, there’s also Blue Bottle which is like a bigger chain. There’s a lot of places that are more–
[00:10:02] Dan: Dutch Bros.
[00:10:03] Adam: Yes. They have a more local, cult feel to them than Starbucks, which is your mass brand, your McDonald’s of the coffee industry. So, they have two choices; they can just say, “We’re the guerrilla. We are the McDonald’s of coffee, get on board. We’re everywhere. You can’t avoid us.” Or they could try to figure out how to make themselves seem smaller. They could camouflage themselves as a smaller brand, but it seems like this is a very QSRy [Editor’s note: QSRy is definitely not a word] offer.
[00:10:33] Dan: This is just saying, “We’re the gorilla and we’re going to keep going down this path and act that way.” They might be winning or surviving, or thriving because we don’t have their numbers, obviously, by sheer mass, by volume. Convenience is their big play today to your point about that Portland corner. Maria and I were in San Francisco and there was one directly across the street from the other.
[00:11:04] Adam: Right. Right, exactly.
[00:11:05] Dan: You see that a lot, especially in the major metros where there’s a lot of walking. But all of a sudden, it really becomes– it’s not a choice, it’s a convenience. It’s like when I set a meeting with somebody and they want to go have a cup of coffee, typically it’s like, “Well, let’s meet at that Starbucks at the corner of.” So, it’s just convenient.
[00:11:32] Adam: Well, do you think that’s a negative? That it’s so ubiquitous, that I say, “No, no let’s go somewhere else. Let’s go somewhere special. Let’s go– meet me at this place. Meet me over here, or let’s do something else.”
[00:11:47] Dan: I know McDonald’s doesn’t exactly parallel this, however, McDonald’s is just now eking themselves out of a long-term traffic problem they were having. They were convenience play, right? Because think about the sheer number of stores that they have.
[00:12:05] Adam: And locations. They’re the A, A, A, real estate.
[00:12:08] Dan: Always, always.
[00:12:09] Adam: Easy on, easy off.
[00:12:10] Dan: They’re upgrading all those locations, too, to make it easier for drive thru. So, they’re really upping the convenience play there, but that’s what I mean is that McDonald’s got there, and now they’ve had to really reinvent themselves to win back customers. The breakfast day part was huge, a big play there. They’re obviously doing variety things, but I wonder if they’re not really damaging the brand with this strategy. It doesn’t seem to make sense to me.
[00:12:42] Adam: Something’s weird with both of those because McDonald’s had great luck when they launched all day breakfast, but it’s cooled off now they have a traffic problem again. That’s kind of a relapse of a traffic problem, if you will.
As people adapted and said, “Okay, I’ve had an Egg McMuffin at 2:00PM. That’s not interesting anymore.” So, they’re sort of probably retreating back to pushing breakfast at breakfast time, and Starbucks is saying, “No, no, no. We’re going to– you gave up this spot, we’re going to try to hold it.”
[00:13:09] Dan: It’s not a defensible competitive advantage, breakfast offerings.
[00:13:14] Adam: It’s not.
[00:13:15] Dan: Everybody just followed suit.
[00:13:16] Adam: No, and you could go to–
[00:13:17] Dan: Boom, boom, boom.
[00:13:17] Adam: I can go to QuikTrip. I mean, you can get a pretty good breakfast almost anywhere. I mean, compared to a breakfast sandwich, it’s not hard. So, it’s–
[00:13:26] Dan: So, all of a sudden, they’ve got challenges that aren’t familiar to them.
[00:13:33] Adam: Yes, I think so. So, trying to get into that QSR space for Starbucks is not familiar to them at all. I don’t think it’s familiar to their core customer. I think their customer, in general, has obviously grown up seeing that stuff, but the customer that they covet, I don’t think is responding to that $5 offer.
[00:13:53] Dan: Right, because their core customer is that person who goes and gets that exact drink that they love, and get– you know, my ex-wife got the PITA, the pain in the– I called it the pain in the– yes.
[00:14:07] Adam: [laughs] Because you got that fancy drink and I need it shaken three times, and exactly 176 degrees.
[00:14:11] Dan: Exactly, and that’s their core. Think about the people that come in and just– they have their white cup with the green circle on it, and it’s the same thing they get every day, day in and day out. So, interesting play for sure.
[00:14:26] Adam: Well, they’ve been so successful at getting those people. With the way that they have leveraged that app to get people into, really into habitual visitation and going in and ordering that same thing. Now, it’s like, “I hit one button, it orders me yesterday’s order. I don’t even have to think about it.”
[00:14:48] Dan: Yes, because you don’t have to talk to the barista, that’s why you like it. [laughs]
[00:14:50] Adam: I don’t have to talk to anybody. I’m not very social. If you’re listening, do not call me. You can leave me a voicemail, I guess.
[00:14:57] Dan: You know, one of the other things I want to talk about is related to this, just going back to the marketing. You know how much we hammer on the idea of craveable, right?
[00:15:08] Adam: Yes.
[00:15:09] Dan: That commercial, I didn’t go, “Oh my gosh. I got to get that.”
[00:15:14] Adam: I’m going to post the ad. I took a screenshot of it because actually I was a little bit put off. It looks like what you actually get, which is not how you do it. You’ve got to take some liberties when you’re talking about food and make it look craveable.
[00:15:28] Dan: Yes, where’s the cheese dripping off that thing or-
[00:15:30] Adam: Yes, it looks like it just came out of the microwave.
[00:15:31] Dan: -somebody consuming it, perhaps?
[00:15:34] Adam: Right. Maybe they’re easy on the eyes, as well. Male or female, I don’t care, but attractive to look at.
[00:15:40] Dan: It was none of that.
[00:15:42] Adam: Could it be a local offer that they’re just [crosstalk]-
[00:15:45] Dan: Testing in Phoenix?
[00:15:46] Adam: -10 zip codes?
[00:15:48] Dan: That’s a great point. I never thought about that, but maybe that’s why there’s no POP. Phoenix is a notorious test market for many, many brands, national brands.
[00:16:00] Adam: But we’ve seen it on TV. They’re too sophisticated. They wouldn’t miss that. It would be in the store if they wanted it in the store.
[00:16:08] Dan: They could be testing– maybe they’re just testing the offer, see if it has any measurable impact on traffic.
[00:16:20] Adam: Yes, that’s probably part of it. It’s definitely an interesting move. But now, it looks like they are in QSR mode. Let’s talk pricing. You brought up margins on coffee, and those margins used to be more ridiculous. Starbucks sort of hurt themselves by becoming so successful that the supply cost more money, so they cut their margins. I’m sure they do okay.
[00:16:44] Dan: I’m sure they do.
[00:16:46] Adam: But getting into that $5 game, and having like a meal offer, weird?
[00:16:52] Dan: Very, and dangerous. I think you said it. If the audiences tends to be a little more upscale and willing to spend that 3.50 to 5.50, whatever it costs to get their latte there, now all of a sudden you’re telling me I can have a coffee and a sandwich for less than my latte cost?
[00:17:12] Adam: Right, yes. What about the brand perception? Their value prop is not– the word value doesn’t belong anywhere near their value profits. You don’t go in there to save money.
[00:17:27] Dan: No.
[00:17:27] Adam: Right? Like Subway, a $5-footlong? Let’s go.
[00:17:28] Dan: You expect it. Right.
[00:17:31] Adam: Right? But I know what I’m getting into.
[00:17:33] Dan: You just put yourself on, I think, which is our point about this whole thing is you’re now putting yourself on par in a competitive space with QSR, which is a male 18 to 24-year-old [laughs] audience in spades.
[00:17:44] Adam: Yes, it’s not your audience.
[00:17:45] Dan: So, is that what you want? You want men 18 to 24 coming in the restaurant? I don’t think so.
[00:17:52] Adam: Well, let’s talk about the flip side of that because I hadn’t thought about it until you just said that audience, that demo. Are you going to compare favorably? If I go to McDonald’s and I get their coffee and whatever their breakfast sandwich is, and then I go to Starbucks the next day for five bucks, and I get their coffee which, in my opinion is better, and their sandwich, which probably isn’t all that much worse, does that $5 feel like a deal at that point? Does that change perception?
[00:18:21] Dan: Think about this.
[00:18:22] Adam: But it’s a small coffee versus a 20 ounce coffee at McDonald’s, probably.
[00:18:25] Dan: Right, there’s that, but then there’s the experience. So, QSR is known for, what? Being quick.
[00:18:33] Adam: It’s in the name.
[00:18:33] Dan: You could–
It’s in the name. I’ll give you three guesses. You can find yourself in a Starbucks and it’s not quick, because depending on what time of day it is, if you’re being driven in there for breakfast, it’s going to be morning rush hour.
[00:18:50] Adam: I mean, prepare yourself to stand there and wait with this rush of online orders.
[00:18:54] Dan: Really? That’s going to be an experience downfall for them-
[00:19:02] Adam: Great point.
[00:19:02] Dan: -if they drive traffic. So, if they do successfully drive a QSR– if they steal a QSR occasion, which appears they’re trying to do, then that QSR customer is going to go, “What is this? This isn’t–?”
[00:19:19] Adam: Right. I’m standing here waiting for 10 minutes for this thing to come out of the microwave. At least McDonald’s has the courtesy to hide the microwave behind the–
There’s nothing wrong with microwave breakfast sandwiches. We love them. It’s delicious. Well yes, but I think that offer in particular tells me they’re looking at the QSR model. The pricing tells me that. TV, as a medium, mass market, QSR model, I mean we’re just talking about-
[00:19:50] Dan: A hundred percent.
[00:19:51] Adam: -Burger King, it’s the number one driver for craveability, now they’re on TV. What did the TV spot look like?
[00:19:58] Dan: You know, it felt a lot like that Instagram post. It was like a voiceover with–
[00:20:06] Adam: Solid green.
[00:20:07] Dan: Yes, the camera moved towards the sandwich and the coffee and five bucks.
[00:20:14] Adam: I’ll find it on YouTube and try to post it with this, so people can see it and see what we’re talking about here but–
[00:20:22] Dan: Obviously, the production quality was fine, but there was not a lot of thought put into how to position that sandwich.
[00:20:33] Adam: The food styling.
[00:20:34] Dan: You’re right, and all of that. The audio wasn’t something about the ingredients and–
[00:20:42] Adam: Was it just a straight up? Come in and get a five dollar–?
[00:20:46] Dan: What I remember. Keep in mind, I’d be careful because I did just see it one time and I probably [crosstalk]
But again, it wasn’t– I think about what Carl’s Jr. does with that burger and all the QSRs. They show off that food we call the food porn. There was no food porn going on here.
[00:21:10] Adam: Yes. They aren’t trying to make it look like, “Just come in and get this deal. We have got to get rid of these sandwiches. They’re going to go bad.”
[00:21:15] Dan: [laughs] We got to get rid of these sandwiches.
[00:21:17] Adam: But what do you think of TV? You said earlier and I agree that when they’ve been on TV it’s been more lofty. It’s either been their packaged product or CPG kind of angle on Starbucks or brand. They’ve done holiday themed or like Frappuccino branding but they haven’t done, “Here’s your offer LTO stuff.” That’s it. They have the pricing. They have the offer and they have their on TV, the number one driver of craving, where are they going from here? Give me some prognostication.
[00:21:49] Dan: I think it’s going to fail, and the reason is what I was just talking about earlier. We know that television is a highly effective medium. So, if TV proves out in this scenario and does drive that occasion, I think the experience is going to not live up to expectations in terms of wait time to get the product and so forth and how I have to order and the environment I’m in, too. I think it’s flawed.
[00:22:25] Adam: So, if they get those people that they are trying to get–
[00:22:28] Dan: I don’t think you’re going to get it. I don’t think you’ll get the second occasion out of them.
[00:22:31] Adam: No, but I don’t think you’re going to win the Taco Bell audience that just defected from McDonalds and back again, and now back again, it’s not going to Starbucks to try.
[00:22:42] Dan: No way.
[00:22:43] Adam: They have to deep fry the sandwich in I don’t know, Frappuccino. I don’t even know what kind of gimmickry they would have to do to get that audience.
[00:22:50] Dan: Yes. They’d have to wrap it in some kind of chicken fried goo or something like that [laughs].
[00:22:55] Adam: Well, so much of this stuff– chicken, yes that sandwich. So much of this seems about novelty and there’s nothing novel about this, but it’s also not sophisticated. It doesn’t have the Starbucks like polish. Everything they do is really freaking polished.
[00:23:11] Dan: Everything.
[00:23:12] Adam: But this doesn’t.
[00:23:13] Dan: Again, I couldn’t pronounce the name of that latte because I went to three different stores and every store had that POP up promoting that new latte.
[00:23:22] Adam: Yes, you walk in and it hits your right there.
[00:23:23] Dan: Yes, it was on the door then it was right up above [crosstalk]
[00:23:26] Adam: It looks pretty good.
[00:23:27] Dan: It does.
[00:23:28] Adam: The appetite appeal on that is really well done.
[00:23:30] Dan: Right, right. But that’s their core, right? That’s what they do. That’s what they do well. It looked high-end to me. I looked at it and said, “That’s probably five bucks for one of those bad boys.” More power to them if they sell those because five bucks for that probably has a hell of a lot more margin than five bucks for a tall and a sandwich.
[00:23:50] Adam: Yes. I’m not kidding. I just was at Sunoco filling up my car and they had an ad, an A-frame in the parking lot that said “Our New Breakfast Sandwich,” and it looked better.
[00:24:03] Dan: Seriously?
[00:24:04] Adam: It looked better and I’m sure–
[00:24:04] Dan: Sunoco’s got a better–? [laughs]
[00:24:05] Adam: It’s like a roller dog. You know what I mean? It’s an AMPM, it’s not Sunoco, so I stand corrected. Still, though, the photography looked better. Not comparing the sandwich, the food product and the food product, or the experience. But just that food photo, I was like, “Hey, maybe I should go into AMPM and get the roller dog action here.” But I didn’t. I didn’t look at it and think it looked terrible. Starbucks going– it just doesn’t look like their brand.
[00:24:32] Dan: No. Again, it’s very fascinating. It will be interesting to watch. Probably we’ll be doing a follow up podcast on this.
[00:24:41] Adam: Yes, the stock price will be triple and it will be like, “Starbucks booming breakfast sandwich business.” It could have been predicted.
[00:24:47] Dan: Stealing shares from all QSRs.
[00:24:51] Adam: You can almost put it in writing. It’s going to happen. All right, well, I think we’ve covered this one. Thank you all for joining us. If you disagree, you’re wrong, but if you want to try to debate and have some fun with this topic, we would definitely love to hear from you. You can find us on Twitter @F&RM or you can email us Dan@foodandrestaurantmarketing or adam@foodandrestaurantmarketing. Thanks for listening.
[00:00:05] Adam Pierno: Welcome back to another episode of Food and Restaurant Marketing. I am Adam Pierno. With me today again is Dan Santy.
[00:00:14] Dan Santy: Hello everybody.
[00:00:15] Adam: Welcome back. Are you excited?
[00:00:18] Dan: Always.
[00:00:19] Adam: Are you ready?
[00:00:20] Dan: I’m always.
[00:00:21] Adam: This is something we people get very fired up about. This topic I may end up with a black eye or a busted lip, I’m prepared.
[00:00:29] Dan: Why are they giving it away Adam?
[00:00:32] Adam: Why are they giving it away? Would you like to talk about the topic today?
[00:00:36] Dan: Offers and discounting, stop yourselves. Stop yourselves.
[00:00:40] Adam: [laughs] Well, there’s probably a time and a place, I would imagine.
[00:00:47] Dan: There is. I’m always the contrarian on discounting, I always will be. I don’t think it’ll ever go away. I marvel at the flyer in my mailbox almost every day. Clearly, it’s working on some level and achieving some level of results for many, many customers — many, many, many restaurant brands. But I just think it’s so antiquated. When I look at — every so often I look through that flyer and I’ll just see what are they doing and it’s the same thing over and over and I marvel at it. Here we are 2017, essentially right? We’ve had 20-plus years of the internet, digital marketing is just exploding, it’s about ready to blow past television and spending et cetera, et cetera. But yet, every week we get and wake up, sometimes a couple of times a week, I get this free standing insert (FSI) in my mailbox with literally dozens upon dozens of companies giving stuff away.
[00:01:56] Adam: It’s amazing.
[00:01:57] Dan: Yes.
[00:01:58] Adam. It’s amazing and I think it just takes discipline for companies to do it right, like anything.
[00:02:03] Dan: Always.
[00:02:04] Adam: Like anything we talk about. Let’s talk about what the challenges. Really, we want to split up two things; Discounting which Dan hates versus Offers and knowing when to use each and they’re different levers you can pull, there are different amounts you can discount. There’re different ways to break up things and making offers or feel like offers or look like offers that maybe aren’t really offers or they aren’t really discounted.
[00:02:29] Dan: My favorite.
[00:02:32] Adam: One thing we’ve seen this with some brands that we consult with, where they get into a discounting cycle and essentially the customers are trained to wait for that discount. They do not come in until they get the coupon from the FSIs or from the internet or whatever it is they are trained to wait for that coupon.
[00:02:52] Dan: Unequivocally, that’s the thing that drives me absolutely [unintelligible]. How many brands have we consulted with Adam where they show up and we start working with them and we see that they’re using the discount drugs, it’s like heroin right? and I always get the same story. Yes, but we’ve got to comp over last year and we did a coupon –
[00:03:17] Adam: Yes, and we do sympathize with that.
[00:03:18] Dan: – and I get that again, but that’s false. I said this before in our loyalty discussion about we’ve got people to answer to. Might all our clients have people to answer to whether it’s straight to the C-suite, PE, for whatever the case may be. We get it. We’re not ignorant to that fact. But we also know that we have successfully helped brands wean themselves off –
[00:03:44] Adam: Short-term pain for a long-term gain.
[00:03:46] Dan: Exactly, and listen, forgive me but I use this drug analogy but that’s what it’s like. You’ve got to wean yourself off. You can’t just turn it off one day. I mean, technically you could, but we don’t necessarily recommend that. What we try to get our clients to do is wean themselves off of that and demonstrate tested optimized. Demonstrate how we can help them lower their reliance on discounting.
[00:04:15] Adam: Yes, if you just turn it off. Traffic will drop off the face of the earth when the discounts are due. That’s not a correlation, that is just a hard connected fact.
[00:04:27] Dan: Exactly.
[00:04:28] Adam: If you’ve been doing hardcore discounting, you no doubt have built up an audience of people that are coupon clippers and when you stop that, the flow of coupons, the lines of people will stop pulling into your parking lot –
[00:04:41] Dan: Correct.
[00:04:42] Adam: – It’s a given.
[00:04:43] Dan: Yes, and agreed.
[00:04:44] Adam: Let’s talk about what customers see in the marketplace than when they are seeing your offer or your discount and how you can vary those things. We break them up into three different things; Discounts which we’ve already talked about. That’s your standard coupon where it’s a BOGO or I’m giving something away and I’m actually cutting my margin by doing that–
[00:05:07] Dan: Cents off.
[00:05:07] Adam: Cents off, yes, or more, sometimes. Offers. On offers, an interesting thing, we subscribe to the notion that an offer is really just a way if you could re-package the same thing that you already sell and just remind them that it’s there and by putting a price point, even if you have an entree that you sell for $16.95 on any given night and you put it with the same price point $16.95, it will appear like an offer. It will appear as a discount to the consumer.
[00:05:40] Dan: Especially if the imagery, the messaging creates crave-ability. It really can become a branding opportunity too. Here’s this beautiful 6-ounce New York or fillet, I’m just picking on that for maybe a casual dining restaurant that serves steak and you have that $16.95 price. It’s like, “Man, that looks good” and it doesn’t sound terrible.
[00:06:13] Adam: Now, let’s talk about price. It’s not here in our notes but we’re really strong believers in there’re some price point barriers that if you can get something under $10, that if you can hit $9.95, you’re going to sell more. You’re going to see more traffic, we know this. This is not anecdotal, this is not a guess. We know it. We just watched it happen and so many times we see, when we were working with brands and consulting we say, “Just give us three menu items that can get to that price point and let’s work with option, let’s work with food and let’s get to work with culinary and get the portion size right. They go, “Well, we really can’t do that or our bestseller is this version and it’s only $12.95.” Look, $12.95 is good but $9.95 is better. It’s the magic number.
[00:07:03] Dan: Yes. That’s like a $5 price point now or I think it’s even come down to four bucks maybe? But I think it’s $5 now that all the QSRs have out there. I see Wendy’s doing it and Taco Bell –
[00:07:14] Adam: Yes, the $5 number is back.
[00:07:16] Dan: Yes and that’s for the QSR and then casual-dining. Adam’s right. That $9.99- $9.95 is magical. Again, this is a hard business man, we get it. We understand your business so well. We know how hard it is slogging it out every day and you’ve got — Adam brings up a great point, is you’ve got to work with the integrated team of Finance ops and culinary, whoever that is in your organization, to create the best program that will actually attract guests and make them feel, like if it’s an offer, that they really are getting a good deal.
[00:07:57] Adam: Right and you’ve got to reset those expectations. The next kind we talk about discounts and now we just covered offers. The last kind is your LTO, so those are your Standard Limited-Time offer. Now again, this is all a matter of perspective, so a lot of times when we talk and we say, “Well okay, we think news is good.” If we can do something with your menu to create some news. Let’s talk about an LTO the pushback that will get again, is it from culinary or from OPS and they say, “Well, training the staff on this or that is really hard.” It doesn’t have to be creating an entire new subcategory of your menu. Sometimes it can just be combining things in a different way or changing out cheese or something very simple that all of a sudden takes it from the regular burger to the power burger. The spicy hot version of the same burger because you put pepper jack cheese on it which right now would be a great deal.
[00:08:53] Dan: Exactly and what I love about LTOs is that you are reminding people about why they love your brand and giving them a reason to come in. Discount by itself, sorry, is not necessarily a reason to select you. It can perhaps motivate certain customer basis, that high-discount customer, high volume discount customer. But the LTO has a broader swath of reach when you put that out there. Adam’s absolutely right. Flavor profile enhancement, a unique twist on a product, whatever. The interesting thing to remember is that I believe we saw some research and correct me if I’m wrong, where it’s like people were told, “Hey come in for this exotic hamburger” and they just ended up ordering the cheeseburger anyway.
[00:09:50] Adam: Yes, that’s from the Counter — yes.
[00:09:53] Dan: Yes. It’s interesting, but if that advertisement, that limited time offer was the driver to get me to your parking lot, well then, it’s done all the work it needs to do. I don’t need to order it.
[00:10:08] Adam: That’s right. Then I think that applies to offers as well.
[00:10:11] Dan: Right.
[00:10:12] Adam: What we love about offers is, as Dan said, is credibility. Sometimes you just take your best selling item and you re-package it as an offer. People are waiting for that reminder about your concept, what they like about it and you’ve showed them what they love about it. You’re not bringing in some new crazy menu items that doesn’t make sense. You are saying, “We sell hamburgers. Here is a great hamburger from us.” “Okay, I forgot about that. Now I want one.” Another really powerful thing about LTOs that I think is overlooked if we stay on the idea of a first casual burger, it gives you an opportunity to ride a trend. I mentioned a spicy trend. Both flavors are really popular right now and Sriracha is riding that wave. But vegetables and garden fresh is just heating up and there’s more and more concepts coming out.
We know that Smashburger’s eventually is going to have to make a really strong play there, and LTO is an awesome way not only to get a vegetable based product. I don’t know what that would be. Not something beyond a veggieburger. But to test tender for once over the course of a year and figure out a new mix that they can create a menu that it will appeal and stop that veto for that vegetarian or that non-red meat eater each time. In LTO there’s a great way to get that attention and say, “Okay. I never thought of them like that.” Now they’re on trend for this strength trend that when I think about Zoe’s and think about all these better for your options, all of a sudden you can be aligned with it just through this LTO.
[00:11:47] Dan: Absolutely. Smart. Smart.
[00:11:51] Adam: When we talk about coming up with things that will stop a veto that’s another powerful reason LTO as an offers really work. Think about if you’re crafting those things, we’ve given you some thoughts starters based on some no votes that we get as we’re pitching ideas or as we’re presenting research to brands. Another thing is really understanding the audience that you want and figuring out what is the inertia that keeps them from coming in. If you try and just get a half extra visit a month, if you try win back customers who are lapsed, you know somewhere there is research that will tell you. If you’ve conducted the research or you need to conduct the research to know why they’ve lapsed or why you’re not getting that , where do they go for the next half a visit.
[00:12:38] Dan: Exactly.
[00:12:40] Adam: Craft your LTO to beat that.
[00:12:42] Dan: Exactly. Remember, we’ve got a client that I really respect a great deal because they dig in after an LTO runs. Typically run a 6 week window, Adam is that correct?
[00:12:57] Adam: That’s correct.
[00:12:59] Dan: They look at the penetration of that LTO. They look and see what was the sale through on that particular LTO number one. They look at the average ticket for that LTO and they have that historical data across many years –
[00:13:16] Adam: And by channel.
[00:13:17] Dan: – and by channel, that’s right, and by [unintelligible 00:13:19]. Is that what mean?
[00:13:20] Adam: No. By media vehicle.
[00:13:22] Dan: By media vehicle.
[00:13:23] Adam: They track it all the way down from every vehicle through redemption as much they can.
[00:13:27] Dan: Yes. That tells them so much about what to do going forward. It gives them standards. What are the sale through levels we want to see? When something performs under that they are like, “Okay. That LTO we’re going to put that thing at the back-burner or we’re just going to set it out to pasture.”
[00:13:48] Adam: That won’t be returning.
[00:13:49] Dan: Yes. We won’t bring that back. That’s another thing that we believe is very important if you adopt an LTO strategy. It’s to look at that limited offer and how well it’s doing. Again, the bash on the discounting for you. That kind of information is so valuable in forward thinking analysis. Discounting doesn’t give you that same depth of understanding because all you’ve got is this, okay well, a thousand people redeem the bogo[sp]. What have I learnt other than a thousand people redeem the BOGO.
[00:14:30] Adam: Right. You didn’t do anything interesting enough to have a finding from it or takeaway.
[00:14:34] Dan: Exactly.
[00:14:36] Adam: Another thing that you can be thoughtful about is you’re choosing a guidance for an LTO or just choosing items for an offer more than a discount. A discount is really how much margin can we stand to lose as loss leader to drive traffic. Let’s take that off the table. We know what that is. For an offer, think about the item that you’re offering and what people will order on top of it. We’ve seen a lot of offering really good deals on sides knowing that people are going to come in and order an entree or they’re going to add beverages, they’re going to add drinks, right? You can create the offer that looks like a really good value because you know where the off-sale opportunities are and your staff is ready to pounce on those ready to capitalize and say, “Okay. Now I’ve got your $13. I know I can get you to $18.” Your guests doesn’t feel ripped off from that.
[00:15:26] Dan: No. Especially don’t feel ripped off because they’ve made the decision. That new answer is so critical. When you’ve sold, you don’t have the same experience when you choose. A whole another level of experience is perceived.
[00:15:43] Adam: At that point you feel,” Okay. I’m getting a good deal so I don’t mind spending less. I’m buying something else at regular price and I still feel okay about it.”
[00:15:51] Dan: Exactly.
[00:15:52] Adam: Because the main thing I came in for was on sale or the least I thought it was.
[00:15:55] Dan: One of the point I want to bring up, I know that we talk about [unintelligible 00:16:00] and [unintelligible 00:16:02], I believe that’s the term.
[00:16:04] Adam: [laughs]
[00:16:05] Dan: But when you start talking about discounts with that audience I always think back to the research we did where we discovered that they’re making the decision to dine out within an hour of dining out.
[00:16:18] Adam: Less than that, yes.
[00:16:19] Dan: Yes, or even less than that. How does a discount work in that environment? I have to have had to put that coupon in my pocket or have it somewhere preserved. It has to be — If I’m making that decision from my home or from my office or from my car, or where I’m going to go, I don’t see it as a driver for that audience. I think they love some of the electronics stuff that’s happening in absence of what and what not. But in mobile wallets really it’s really important. If you’re going to go down that discounting route, please, please, please make sure you create the mobile wallet environment because –
[00:16:59] Adam: Make all the tools if you can to get into my phone.
[00:17:02] Dan: Yes. Especially if you think you’re going to make any in-roads with millennials.
[00:17:06] Adam: No, you are dead on. I tend to think of offers in LTOs with regard to millennials and now iGen or GenZ. It’s news. I’d like to use them as a level of news. That’s how we consult our clients to use them. Having that announcement about that product gives you permission to say something. Because otherwise it’s very hard to be relevant and it’s hard to have a meaning for me. If I’m in Facebook and I’m just scrolling through, why do I want to hear from this? Why do I want to hear from smash burger? Why do I want to hear and I know everybody is creating consent and trying to get infront of me. I’m just here to talk my air. I don’t know, but all of a sudden you have news, you have something to say. You got a new product or here is a new combination of things or “Hey, this is on sale.” I was like, “All right. I forgot about that.”
[00:17:58] Dan: Exactly.
[00:17:59] Adam: However you can use news and I’m picking on Facebook but whether that’s done on TV or other digital channels that’s fine. But you have to find ways to be relevant and sometimes that’s kind of manufacturing something. Like an offer on LTO.
[00:18:13] Dan: Yes. Kudos to McDonald’s and how they leverage the news of breakfast all day.
[00:18:19] Adam: And now they’re doing it again with the McRib. The McRib is back and they’ve been pretty smart about rolling that out and making it feel exclusive and they’re doing a good job.
[00:18:30] Dan: I think it’s been around for, what? 30 years. I almost remember that when I was in high school or something the McRib. It’s really amazing how they have successfully let that be that LTO. In this case, it’s not even an offer. It’s just a limited time offering.
[00:18:47] Adam: It’s a true LTO. It’s once a year if that. I’m pretty sure it’s every year but the whole thing about that is it’s supply because they can’t get the supply. That’s why they make it once a year. That’s what drove it originally to be an LTO.
[00:19:02] Dan: Interesting.
[00:19:03] Adam: It was a test item and they couldn’t roll it out full time. I think it works better for them as an LTO. I think it actually creates that news, then it goes away and then next year I’m excited about it when it comes back.
[00:19:12] Dan: Talk about a reason for a lapsed visitor to make their way back. I love that McRib and nobody else has it. Every year I do that. It works on a number of different levels.
[00:19:28] Adam: It’s a great example of what we’re talking about, finding a way to make news. You’re right, all day breakfast was another thing that they did where people had been begging for it for three years. It seems like just so stupid. Why can’t I get breakfast at 10:45? When they did it I think they did a good job of doing it right and really sticking it back into Taco Bell’s face. You want to have breakfast fight? Let’s have a breakfast fight.
[00:19:54] Dan: And now they’ve, from my understanding, they’ve actually rolled it’s like almost the full menu.
[00:19:58] Adam:: It’s a lot of the menu, yes.
[00:20:01] Dan: It’s funny to see the followers coming along, so you saw Jack In The Box, saying they’re doing brunch.
[00:20:09] Adam: Brunchfast?
[00:20:09] Dan: Yes, Brunchfast.
[00:20:11] Adam: I’ll take it.
[00:20:12] Dan: They’re trying to compete now, now they’re trying to stay up with the gorilla.
[00:20:18] Adam: Well, now yes. At this point, now everybody has to do it now. It’s become table stake, so McDonald’s set the agenda. Whether they were goaded into it a little bit by a Taco Bell. How often do you think regular presentation of on an LTO or an offer makes sense before an audience gets desensitized. If we’re saying it’s newsworthy, do you have any thoughts on regularity or cadence?
[00:20:41] Dan: I think back to our client that’s been doing it for a while now, meaning a number of years, and doing it successfully. I think that’s that four to eight week window, depending on who you are as a brand, what kind of frequency you currently get from your customer. I think that that window is a good window, and again, it comes back to what you said earlier, that it’s a news bulletin. It is a news bulletin about your brand, and it keeps you in — you get a share of mind, with that new piece of news, which all of a sudden gives you a potential access to share of stomach.
[00:21:27] Adam: You know that what we found is that the cadence of the LTO’s offers, is probably directly related to the frequency of visits. However much you’re trying to amp that up, if you’re a once-a-month-place, then you can probably get away with every other month, in having an offer, and if you are that last over that time, and if you’re at once-a-week place, then you might be able to do it much more frequently, because you’re trying to keep that pace up, or you’re trying to get people excited to have that time on the experience curve, where they get some new wrinkle every time they’d come in, that makes them come back next time. Otherwise forget it, they start getting bored, and they’re done.
[00:22:01] Dan: Yes. It does another thing too, is like if you get bored with a place and I can, I said this earlier, you get bored of a place. “Oh, I keep having the same thing every time I go,” so it becomes a reason not to go back, and it reduces my frequency. But the LTO, it gives me a reason to come in, I may still get what I always get, because that’s just who I am as a human being.
[00:22:29] Adam: If you saw, you would have some new stimulus, and it created a new memory for you, and then you had something new to tell somebody about it –
[00:22:36] Dan: Exactly.
[00:22:36] Adam: – which, amen. All right, last question on this is, how far out are we planning these things, how far out are we leading LTOs and offers, before they actually hit the market? The answer is as much time as you possibly can, and the reality is, just try to do in fewer than two weeks, or longer than two weeks. Frequently it seems like they come up as a rush, we know that planning these things out a year, six or eight months out, and having everything figured out before, is really what we target. Then make sure that the operationally everybody is trained up and ready to go.
[00:23:11] Dan: You can have that discipline, it ensures, I shouldn’t say it almost ensures success, but it elevates the possibility of success the further out you work, because in the creative can be better, the channel selections can be better –
[00:23:30] Adam: The execution that –
[00:23:31] Dan: Everything about it.
[00:23:32] Adam: – and operation level can be better, and we know that so much of it comes down to training. If you have a new, if it’s a true LTO where there’s a new menu item, and that means a staff has to learn how to prep it and how to serve it and how to sell it. Well, you just can’t bang that stuff out, if you want it to be excellent, you have to do it. We had an engagement with a fast-casual Asian brand, and they were rolling out a new menu item, which was a whole new category for them essentially. Watching how that testing went, and going in and seeing it in the field, and then seeing like, ” Rr, this is wrong.” We experience what the test was like, and then we saw it tested in market, and it was way off, and they rushed it, they rushed it just to get it out there. It takes time to do that stuff right and make sure that everything is operating on all cylinders, because if it is the true LTO, and people are trying, new based on it, it has to deliver. It has to deliver on whatever you promise, or you just had to keep those things in mind when you’re crafting what the LTO should be.
[00:24:36] Dan: Couldn’t agree more.
[00:24:38] Adam: All right. Well, I think we’ve beaten this one into the ground, what do you say?
[00:24:42] Dan: I think we have, there’s a few more things I’d like to say about why you shouldn’t discount for. I will restrain myself today.
[00:24:50] Adam: We will, there will be an amendment to this episode, so look for the amendment.