With current focus on optimizing traffic and reinventing service, we recognize it is difficult to think about menu pricing as a top priority. Despite the major spike in unemployment claims as a headwind, there are additional market shifts coming that give rise to addressing your pricing strategy. Beef and pork costs remain uncertain. Grocery prices are already on the rise and will continue with retailers pulling back from traditional summer promotions. Previously-planned minimum wage increases continue. Tailwinds can be found in CARES relief funding, and households are spending against their stimulus deposits. Menu pricing, and its alignment with your evolving promotion strategy, should be part of any strategic plan, and now is no different. It is important to plan but remain nimble. Here are things to consider.
1. Protect Value
In today’s fluid environment, the market may not be as responsive to the usual traffic-driving discounts given the restrictions still in place. Heavily discounted prices are unlikely to drive long term growth, and may just erode margins. Avoid discounting your core brand defining items. Heighten your focus on delivering value in the form of order accuracy, timely delivery, and friction-less pick up. Order and service quality can be a challenge right now (Memorial Day threw some curve balls), and while consumers are understanding given these unusual times, patience may wear thin. Consumers still want to enjoy their restaurant experience and are willing to pay for convenience and quality via new channels.
2. Price for Larger Party Sizes
Continue to offer family meal prices at a value, even when dine-in is available – but avoid setting a new price floor that you can’t unwind from down the road. It is easier to move from $25 to $29 than to be stuck at $20. Highlight the value of bundles in terms of a “per person price” vs the total dollar amount. That can ease you away from the $20 thresholds. In determining bundles, think customer needs first – who are they feeding during the summer season, and which items on your menu are most complementary and should be packaged together. Don’t forget add-ons for incremental revenue – beverages are often overlooked in the takeout and delivery channels. Take a look at your competitors as a benchmark, and make sure you are keeping pace. Click Here to request a sample of our PriceWatch competitor research report or contact your account manager to discuss a custom study.
3. Delivery Prices
Our research shows that most brand’s menu prices are approximately 15% higher on 3rd party delivery sites. The off-premise experience creates difficulty in reconciling an incorrect order. Be vigilant and make certain that your delivery drivers leave with all items in hand. Order inaccuracy will be a double hit against value. Contact your account manager to discuss a custom study on delivery prices among your markets and competitive set.
Adapting to the new normal will be an ongoing effort and maintaining a healthy approach to pricing is important for a brand’s long term health, even in this challenging environment.
The team at Fishbowl has been busy analyzing trends and developing strategy for our clients during the COVID-19 crisis. You can find our guidance and articles here. If you have related questions about your business, email firstname.lastname@example.org.