Casual Dining and QSRs Turn to Price Promotions

Pricing is a powerful marketing tool. Experiment to set it right and you can bring more people to buy, making up in volume what you give up in margin.

Casual dining and quick-serve restaurants know this as well as any industry that uses the technique. It seems to have made a difference, according to Placer.ai. Limited-time offers (LTOs) are boosting consumer response. Dropping prices can also be an admission that something is wrong. That may be the case there.

Dining took heavy blows during the pandemic, and when people felt they could safely go to restaurants, they did. Early this year, Citizens projected that restaurant sales would rise 6% year over year. Just over a third of people visited casual dining restaurants at least once a week. As macroeconomic forces continue to ease, their projection is for another 6% increase in 2024.

But there was also increased consumer debt — at historic levels — with the end for many of the extra savings accumulated from rescue funds. Ghost kitchens largely bit the dust. QSRs had to rethink space and location as food inflation hit restaurants even though they were projected to grow 10% through 2029. Downtown restaurants and bars found workers returned for happy hours.

Price promotions in consumer-oriented industries are often the cavalry coming to rescue the day. Placer examined how recent price moves by Buffalo Wild Wings, Starbucks, Chili’s, and McDonald’s affected the businesses by looking at their foot traffic.

Buffalo Wild Wings offered $20 unlimited boneless wings on Mondays and Wednesdays and saw foot traffic to locations jump 8.1% right after the launch, with visits on the two days increasing by 45.6% and 49.3% respectively.

Starbucks tried 50% discounts on Fridays for users of its app. Visits jumped 20% over the year-to-date visit average, with patronage dropping after the promotion.

Chili’s Grill & Bar revamped the “3 for Me” menu. Year-over-year foot traffic “was largely positive” and hasn’t tapered off yet.

McDonald’s offered $5 meal deals and foot traffic jumped. “These deeply discounted prices are likely to be particularly appealing to customers against the backdrop of McDonald’s rising menu prices, which have been significantly impacted by inflation,” Placer wrote.

Whether this can last indefinitely isn’t something Pacer, which tracks foot data as an aftereffect. However, some points generally known from experience and study about price promotions is that they lose their effectiveness over time. Customers come to see the lower price as normal. The price cuts can also undermine relationships with customers, as the tactic is treated more cynically.