In the Spotlight > Restaurant Trends

Restaurant brands facing discount voucher “treadmill”

By Rachel Johnson , 07-Dec-2010

Related topics: Business, Trends & Reports, Restaurant Trends, Restaurants, Hotels, Pubs & Bars

Restaurants brands may be forced to permanently lower prices as consumers become accustomed to discount voucher spending, a food service analyst has warned.

Restaurant brands could find it hard to convince consumers to pay full price

Restaurant brands could find it hard to convince consumers to pay full price

This could result in significant weakening of restaurant brands, as operators are forced to adjust their target audience in line with reduced prices, analyst Horizons added.

Speaking at a briefing in London yesterday, Peter Backman, managing director of Horizons, warned the industry that it could be extremely difficult to wean consumers off cheap voucher deals.

“Consumers have developed a voucher-scheme mentality when it comes to eating out,” he said. “It’s a treadmill that many operators will find impossible to get off without redefining their target audience.”

Reward for loyalty

Backman said he recognised the role that discount vouchers had played in keeping diners eating out during the recession, but suggested that a change of strategy, such as rewarding customers for loyalty rather than offering them deals, could be more beneficial for their brands.

Glyn Heald, a partner a business coaching firm Shirlaws, said: “Operators need to think about what discounting does to customer perception and the market position of their business. Foodservice businesses are based around four things – marketing, service, product and price. If the business lowers its price downwards then they are altering customer perception of their position in the market.”

He added that if restaurants are going to embrace discount vouchers on a permanent basis, they will have to adjust their target market accordingly, to lower the impact on profit margins.

“Businesses intending to maintain that lower price point need to make sure they adjust their business model to maintain margins, and this means appealing to a different customer sector, altering service levels and their cost base and changing their market accordingly.”

Market research

Research into the vouchers, commissioned by Horizons, found that around 16 per cent of diners are now making use of the eating out vouchers, with over 90 per cent of these female.

Most of the vouchers are used for 2 for 1 deals at Pizza Express, McDonald’s, Tesco, Domino’s and Pizza Hut.

Many of the vouchers are downloaded through money off websites but many are marketed directly to the consumer, allowing one-off deals to be marketed extremely quickly, such as the Pizza Express deal offering 50 per cent off on some tube strike days.

Heald said: “If they stop discounting, restaurants will have to work extremely hard to ensure customers get something extra for the higher price they are being asked to pay. Customers very quickly get used to paying a lower price for a particular level of service, so if operator effectively raise the price by stopping the discounts, customers could end up feeling cheated.”

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