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Why Restaurants That Offer Discounts Dominate Top U.S. Brand Rankings

Why Restaurants That Offer Discounts Dominate Top U.S. Brand RankingsThere has been much discussion about discounting in the restaurant business over the past few years.  Many in the industry worried that serial discounting would forever cheapen their brand and condition customers to be coupon hunters rather than loyal patrons.

That’s why it was interesting to see the results of a comprehensive study released by a British brand management firm recently.  The Nunwood Customer Experience Management (CEM) Top 100 surveyed 5,000 consumers in the United States in order to determine which brands have the best perception among the American public.

To many, Red Lobster’s third place finish was a shock.  The seafood chain beat out top brands like Apple, Southwest Airlines, and Marriot.  Red Lobster is known for their affordable seafood fare – in fact, they have been discounting what is usually considered an expensive menu item for years.

Respondents to the Nunwood survey raved about Red Lobster’s dedication to providing value and top-notch customer service.

Marrying the two seems to be the key to branding success in food service.  Other top 25 finishers included Subway, Applebee’s, and Chili’s – all brands that have engaged in some of the most aggressive discounting in the food service industry over the last three years.  Adding those discounts to a culture of customer service equals a combination these national restaurant chains have been winning with for years.

The time has come for those in the food service industry who fret about coupons and discounts compromising the value of their brand to realize that not only are discounts here to stay, they are the driver behind customer perception of your business.

As the top chains in the industry have irrefutably proven, the formula of getting customers in the door with deep discounts and then treating them like royalty is the way to earn their respect and loyalty.

Contrary to a popular belief among restaurateurs, the practice of deep discounting to get butts in seats has not hurt the images of these brands but enhanced them so much that they now compete with the biggest brands in America in terms of perceived value.  And that perception is certainly worth much more than any discount.

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6 Responses to Why Restaurants That Offer Discounts Dominate Top U.S. Brand Rankings

  1. Brandon O'Dell June 19, 2011 at 11:08 am #

    Hi Greg,

    I haven’t read this study, but from what you’ve paraphrased, this study only claims these brands are more recognizable, not more profitable. Any restaurant can get buzz by giving away food, but if it doesn’t make them more profitable, it’s a waste of money.

    I would also argue that the brands stated above aren’t discounting either. Sure they put out a few coupons now and then, but their national marketing initiatives are not coupons or discounting. Subway for example repriced it’s menus. That isn’t discounting, it’s adopting a new pricing strategy. The same can be said for Pizza Hut’s efforts with its “one price, any pizza” pricing. What they’ve shown isn’t that discounting works, but that they have a strong interest in moving away from discounting and simply offering a better value on everyday pricing. Applebees major promotions have not been discounts either. They have been value packaging promotions, similar to what fast food restaurant do, where you get a lower price for ordering more at once. Lowering your prices is not “discounting”, it’s pricing strategy. “Discounting” would be offering a percentage or a dollar amount off a regularly priced item, or a “buy one get one” offer.

    I think if anything, these brands mentioned have proven that even the big brands are moving away from coupons and discounting, and toward everyday value pricing.

    • Greg McGuire June 20, 2011 at 4:05 am #

      Hi Brandon,

      All good points. You are right, there is nothing in this study about profitability, only brand value. However, I think it is logical to assume that any restaurant ranking in the top ten favorite brands in the United States should be able to turn a profit unless they are completely mismanaged, which I do not think is the case with either Red Lobster or Olive Garden.

      I agree, “value pricing” is a more accurate description of the strategies these big name restaurants have adopted than “discounting.” No matter what you call it, the point stands that restaurants who are embracing the trend in consumer behavior towards value rather than fretting over whether offering customers discounts, value pricing, bargains, etc. devalues their brand are the ones succeeding in what has become the new norm for the restaurant industry.

      You are absolutely right: discounting as a special promotion has given way to offering value every single day for these very successful big name restaurant brands. That’s the point here: if you want to connect with customers, your value proposition had better be very, very good. Restaurants can’t win on only good food, great service anymore. The whole paradigm has shifted.

      Thanks for your comments!

  2. Gus Pagoulato July 21, 2011 at 8:37 am #

    What a pity!!
    The restaurant industry in the US is corporate driven.
    Every where you look the only concepts that thrive,are the applebees,red lobster,chilie’s,and the like.
    These guys have the advantage of “corporate” buying that the independent cannot dream of.
    So whatever you call it “discounting”or “strategic pricing”or whatever fancy wall street term,the results remain the same.
    The independent is “sqeezed out” and these guys end up with the lion’s share of the market.
    I only hope that the newer generations will reject the “cookie cutter” approach the chains embrace
    and appreciate smaller,dynamic,delicious,well managed concepts,without any gimmicks.

    • Greg McGuire July 21, 2011 at 9:08 am #

      Hi Gus,

      How do you think smaller independents can compete? Consumers are obviously making choices based on price and that isn’t going to change anytime soon. What is an independent to do?

      Thanks for your comments, you make a very good point here!

  3. Keith July 21, 2011 at 10:10 am #

    As a local cafe getting ready for a grand opening I am confidant that value pricing can work.I am working closely with my suppliers to provide the best available products in line with my menu and being flexible to market conditions. Combine that with portion control, excellent customer service and efficient use of employees you will be able to do just what the category leaders do. With these tools a brand can be built with it’s own following.

    • Greg McGuire July 21, 2011 at 11:44 am #

      I like it! Good luck with your grand opening!

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