Friday, January 4, 2013
Why Fast Food Cannot Divorce The Dollar Menu
Fast feeder Wendy's officially announced yesterday that it would be replacing its 99-cent value menu with a new creation called the "Right Price, Right Size" value menu. The "Right Price, Right Size" menu will include fan favorites from the old 99-cent offering complimented with slightly pricier items that are capped at $2.
Why would Wendy's end such a fixture to its brand? They say costs are the culprit. The prices for key ingredients like meat and cheese are cutting into their slimmed-down value menu margins.
However, there's a strong warning that Wendy's "Right Price, Right Size" menu could be a marketing wrong. They should look no further than category-leader McDonald's. After sluggish 2012 third-quarter results, McDonald's CEO Don Thompson blamed marketing higher-priced items on its highly-comparable "Extra Value Menu," which didn't "resonate as strongly" with consumers as the dollar menu. He then proudly proclaimed "we're going back to talk of the Dollar Menu."
I think there is something perfectly simple and straightforward about a dollar menu. Consumers not only know their favorite items but they also have been trained to only pay $1. In their mind, the price of the product is fixed because it’s been branded that way; which is why price and product should never be married.
Pairing the product and price can certainly provide a short-term boost. The dollar menu at McDonald's, the (formerly) 99-cent value menu at Wendy's and the $5 footlong at Subway were critical to the success of each brand during the cash-strapped consumer days these past four years. However, even as economic conditions improve, marketers are discovering that it’s difficult to divorce themselves from these branded bargains.