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.

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