The Two for $20 Royal Rumble Part I
In this slumping economy no one is really spending money like they were in years past; hell no one can afford to. This includes Gen Y. Half of Gen Y is recently out of college, and what was supposed to be a time of high levels of discretionary income is just the opposite. The 2 for $20 deals are directed toward those who want to eat out, but don’t have as big of a budget they once did.
To start this, lets assume there are 3 types of potential restaurant goers:
- Type A: Those who plan on going to a certain restaurant no matter what
- Type B: Those who are on the fence about whether to go to a certain restaurant
- Type C: Those who don’t plan on going to a certain restaurant
Now let’s look at the competitors in the Royal Rumble:
Applebees was the first chain to start their 2 for $20 and they sure advertise it a lot. The “2” represents the number of people that will eat. They use lots of TV, radio and print to get you in the doors. When you sit down, there is an additional menu devoted to the meal deal, and the server is required to tell you about the special.
Chilis started their 3 for $20 shortly after Applebees. In this case the “3” represents the number of courses you get for $20. Chilis has a special insert in their menu for the deal and the sever mentions the deal to the consumers as well.
BJ’s recently has started their “party for 2” promotion. When I went, there was no insert, and the server didn’t even mention it. But when I asked about it, the server told us the deal.
Putting the specific deals aside; how does their use of marketing communications affect their customers actions? The type A customer (who is going to a restaurant no matter what) doesn’t need a deal to draw them into their local restaurant. They already are planning on going.
The promotions should be directed towards the “Type B” and “Type C” customers; those who aren’t sold on going to a particular restaurant. The promotions should be used as a method to sway these consumers to come into their restaurant.
Isn’t Applebees hurting their overall revenue because of their aggressive delivery of the 2 for $20 deal? Instead of making the extra effort to push their promotion at the point of purchase (special menu, and reminding the customer), shouldn’t they mainly use it to get their customers in the door. Applebees is probably losing a decent amount of revenue from “regulars” who spend less because they pushed their promotion so hard.
BJ’s did the promotion right. They don’t make any big deal about their promotion. They didn’t even mention it. The only people that will get the deal, are those that went to BJ’s FOR the deal. They aren’t cannibalizing their own revenue from those already planning on eating at BJs. This way, BJs can make their revenue from both those who planned on going to BJs and those who went just for the promotion. It’s the best of both worlds.
Now I’m not saying to hide their promotions and be dishonest. You can present the deal to customers, but don’t beat them over the head with it.
Chilis and Applebees, need to be careful how they push their promotions customers. Yes, they are getting more budgeted diners in their establishments; but they are also cannibalizing their own revenue by pushing their promotions too hard. So restaurants, deliver your promotions wisely.
Lead them in the door, then let them make their decisions.
Friday I will look at the branding aspect and consequences of these type of meal promotions.
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