Consumer Perception of Value Is a Moving Target in a Recession – Restaurants Learn Lesson (Part One)
Over the years the term “value” has been bantered about as part of our common restaurant marketing vocabulary. The definition has loosely been thought to be providing a combination of food and service at a reasonable price. The conclusion was that if the consumer’s perception of value was met, then our restaurant marketing efforts could be confined to just getting our message to people, if the value target had been achieved.
Now we have discovered that value is a moving target.
Before 2008 restaurants from fine dining to the McDonalds of the world each measured value based on the success of their product. In other words, if people came in the door, you must be meeting the value expectations of the guest. Restaurants at all levels of the per check average from pocket change to $100 five course feasts put their faith in the number of seats filled each night.
Then the world changed. Jobs were lost, corporations re-thought spending, extravagance was eliminated in business and personal budgets, and eating at a restaurant was no longer adventurous, but a well thought out plan. What happened to the customer’s idea of “value”?
To complicate matters, chains like Denny’s, Dunkin Donuts and many others gave away free food. At first they were proud of their achieved success with long lines of hungry people clamoring for their freebie. Supposedly, at the time, the marketing geniuses thought they were building their brand. Now, in hindsight, they aren’t so sure as the long term results have done little to counter their declining head counts. Offering something for free has little to do with value. It is what it is – FREE – there is no value perception to anyone and has no part in a restaurant marketing plan. In fact, there are some studies that indicate offering too much for too low of a cost can permanently harm a brand.
On the high end of the restaurant scale, the Morton’s, Ruth Chris’s, Smith and Wolenski’s and others discovered they weren’t recession proof with their clientele spending $75-$100 a person. Even the celebrity chefs bolstered by tons of free publicity are shuttering restaurants and re-thinking menus. If there is any humor in this economy, it’s watching the many ways celebrated television cooks can “re-invent” the hamburger in their many restaurants. Even this endeavor is failing miserably in many cases.
In the middle range of the per check pricing, restaurants like Applebee’s, Chili’s, Friday’s and the rest started offering 2 for one deals, then it was three courses for $20 for two people, and now, the restaurant promotions that once saw people get small portions and poorly presented entrees, are going back to the restaurant marketing drawing board. The consumer quickly figured out that there was no value to be found in the tiny plates they were getting.
The questions that need answered are:
- What is value today?
- How do we achieve value in our operations?
- How do we react to markets as conditions change?
- What does the future hold?
Let’s start with the last question first. The future for the restaurant industry takes more than a crystal ball to determine. Some economists predict that as the economy recovers from a Wall Street perspective, the consumer may be left behind. Jobs are lagging and inflation will surely follow in our tax and spend environment. Will our restaurant customers be changed forever? Some say it will take many years before we see consumer spending evolve back to pre 2008 levels. So, we can easily predict that our guests won’t be the same for any foreseeable future.
The key to answering the value question is like being a flea in the consumer’s pocket. When will guests have disposable income? I suggest that will depend on the size of a customer’s wallet. As unemployment returns to normal levels and corporations begin spending on inventories and expansion, the picture will remain the same. As incomes return, so will the adventurous spirit and entertainment factor of going out to eat.
In Part Two of this post, we will explore how to achieve value in the customer’s mind in our individual operations.
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