Faster than you can say “Forget 99 cents!,” two big fast-food chains are unwrapping burgers that could lure customers away from the low-priced choices that eased the brands through the Great Recession.
Call them mid-tier burgers, priced to fill the gap between each chain’s new premium choice and the smallest sandwiches on their respective menus.
Indeed, “mid-tier product” is the description Wendy’s uses for its W burger, which will be rolled out in December. “This is going out at a $2.99 price point,” new CEO Emil Brolick explained to investors yesterday. “One of the things we want to do is put a product out there that we think is going to encourage people to trade up. Perhaps those individuals that are purchasing [a] 99-cent item will trade up to this product.”
The lure, he said, is a strong flavor and a high-craft aspect to the burger, which has about “two, 2.5 ounces” of fresh beef.
That seems to be the same strategy Burger King is employing with its new BK Toppers line. The burgers are dressed with flavorings like Swiss cheese, mushrooms and barbecue sauce. They’re heftier than the W’s, with 3.2 ounces of beef, but will be priced at $1.99, according to franchisee Carrols Restaurant Group.
That puts it between BK’s regular and Mini burgers on the low-price end, and the new BK Chef’s Choice at the high end, with a price of $4.99.
The two giants aren’t alone in sandwiching mid-priced burgers between their bargains and their biggies. Carl’s Jr. recently added new Steakhouse burgers, arrayed on the menu between its Six Dollar Burger line (typically priced around $4) and its Famous Star singles.
Missing among the converts is the segment’s true king, McDonald’s. First in size as well as sales growth, it’s been relying with stunning success on its beverages and snack-type items, leaving its burger line-up largely untouched since the rollout of the Angus line.
Showing posts with label pricing. Show all posts
Showing posts with label pricing. Show all posts
Thursday, November 10, 2011
Monday, February 8, 2010
For sale: Restaurant barbells, right price
In the beginning, there was pricing. A restaurant set the charges for menu items on the basis of cost and what patrons were willing to spend.
Then hard times hit, and the chain portion of the industry resorted to what it cleverly called barbell pricing. For the everyday bargain hunter, the big brands offered head-turning deals like a dollar menu. At the other end of the barbell, they sported premium items with a price to match, hoping to snag a higher-margin purchase from sports who felt like splurging.
Now you can scratch “barbell” from the glossary. A single label has yet to emerge, but several bellwether chains are already switching to new and more complex pricing strategies. The approaches differ, but they share the common feature of more precise segmentation.
McDonald’s calls its variety “four-tier pricing.” It’s shifting to a model with four categories of products arrayed by price: Everyday value, or what was once the bargain end of the barbell; core items, with a mid-scale price to match; premium items; and the new fourth tier, or smaller servings of premium selections offered accordingly at a lower price.
The prime example in the United States is the new Mac Snack Wrap, essentially the guts of a Big Mac wrapped in a tortilla. Overseas, McDonald’s offers such four-tier items as the Petite Du Jour in France and the Little Taster sliders in the United Kingdom.
The products are intended to prompt a trade-up by customers who normally purchase off the lower-priced bargain menu. The Mac Snack Wrap, for instance, costs $1.39 in the states, compared with the Dollar Menu.
The items are also seen as a way of building add-on sales. Customers might buy a core item, then try a Mac wrap—in essence, a premium item at a high-value price.
Burger King is taking a different approach with what it’s calling four-corner pricing. Speaking recently to Wall Street, BK executives cited the strategy as a key component of its efforts to build profit margins, but declined to provide details. Their sketchy description suggested that analytics are being used at the store level to help units find the ideal price that their market will bear.
Chain officials said the new strategy was the “primary difference” between the financial performances of company-operated and franchised stores during the last quarter of 2009. The model has now been rolled out to all the licensees, the execs noted.
Starbucks is similarly adjusting prices on a market-by-market basis. The new “architecture,” in the words of execs, is now in place at 90% of the chain’s U.S. outlets.
In a recent conference call with analysts, they described the new approach as a pricing rationalization. Prices were raised or lowered to satisfy the price sensitivities of markets, based in part on demographics and customer reaction. In some instance, that meant dropping charges on selected items. In others, it involved “adjusting some of the more complex costly products,” said CFO Tory Alstead.
Translation: Rising prices on some items to preserve margins, provided consumers don’t balk.
Perhaps not coincidentally, two points of Starbucks recent 3% rise in comp sales were attributed to pricing gains.
The success enjoyed by McDonald’s, Burger King and Starbucks with their new pricing approaches is likely to prompt more pinpoint pricing, at least in fast-food.
Which means the market is about to be flooded with barbells—and possibly some dumbbells, too, if the followers don’t do it right.
Then hard times hit, and the chain portion of the industry resorted to what it cleverly called barbell pricing. For the everyday bargain hunter, the big brands offered head-turning deals like a dollar menu. At the other end of the barbell, they sported premium items with a price to match, hoping to snag a higher-margin purchase from sports who felt like splurging.
Now you can scratch “barbell” from the glossary. A single label has yet to emerge, but several bellwether chains are already switching to new and more complex pricing strategies. The approaches differ, but they share the common feature of more precise segmentation.
McDonald’s calls its variety “four-tier pricing.” It’s shifting to a model with four categories of products arrayed by price: Everyday value, or what was once the bargain end of the barbell; core items, with a mid-scale price to match; premium items; and the new fourth tier, or smaller servings of premium selections offered accordingly at a lower price.
The prime example in the United States is the new Mac Snack Wrap, essentially the guts of a Big Mac wrapped in a tortilla. Overseas, McDonald’s offers such four-tier items as the Petite Du Jour in France and the Little Taster sliders in the United Kingdom.
The products are intended to prompt a trade-up by customers who normally purchase off the lower-priced bargain menu. The Mac Snack Wrap, for instance, costs $1.39 in the states, compared with the Dollar Menu.
The items are also seen as a way of building add-on sales. Customers might buy a core item, then try a Mac wrap—in essence, a premium item at a high-value price.
Burger King is taking a different approach with what it’s calling four-corner pricing. Speaking recently to Wall Street, BK executives cited the strategy as a key component of its efforts to build profit margins, but declined to provide details. Their sketchy description suggested that analytics are being used at the store level to help units find the ideal price that their market will bear.
Chain officials said the new strategy was the “primary difference” between the financial performances of company-operated and franchised stores during the last quarter of 2009. The model has now been rolled out to all the licensees, the execs noted.
Starbucks is similarly adjusting prices on a market-by-market basis. The new “architecture,” in the words of execs, is now in place at 90% of the chain’s U.S. outlets.
In a recent conference call with analysts, they described the new approach as a pricing rationalization. Prices were raised or lowered to satisfy the price sensitivities of markets, based in part on demographics and customer reaction. In some instance, that meant dropping charges on selected items. In others, it involved “adjusting some of the more complex costly products,” said CFO Tory Alstead.
Translation: Rising prices on some items to preserve margins, provided consumers don’t balk.
Perhaps not coincidentally, two points of Starbucks recent 3% rise in comp sales were attributed to pricing gains.
The success enjoyed by McDonald’s, Burger King and Starbucks with their new pricing approaches is likely to prompt more pinpoint pricing, at least in fast-food.
Which means the market is about to be flooded with barbells—and possibly some dumbbells, too, if the followers don’t do it right.
Monday, January 26, 2009
McDonald's new sliders
Burger King tried out a slider in Great Britain before adding one on this side of the Atlantic. Is McDonald’s doing the same?
The burger giant’s U.K. outlets recently added two of the mini sandwiches: Little Tasters, or smaller-sized cheeseburgers served on a mini ciabatta bun, and the Little Italian, the same thing but with a sausage patty replacing the hamburger patty. Prices aren’t listed on McD’s website for the U.K., but you can get the rest of the lowdown here.
McDonald’s Corp. CEO Jim Skinner cited the Little Tasters as a “fourth tier” to the chain’s menu, sandwiched price-wise between bargain items and core selections like full-sized single burgers (the other tier apparently consists of premium-priced choices.) He cited the additional example of a new product marketed in France, the Petite du Jour.
As Restaurant Reality Check reported earlier, Burger King’s U.K. stores started selling a multiple slider meal in May 2008 called the Angus 6 Pack. Last month, another type of slider, called BK Burger Shots, was introduced in some U.S. stores. Two Shots are sold as one order, for $1.49.
In a conference call today with financial analysts, McDonald’s officials didn’t say if the sliders now available in Great Britain might show up on this side of the pond. But Skinner noted that about 75% of units in Europe are now outfitted with a kitchen package called the Bridge Operating Platform. One of the new set-up’s strengthens, Skinner noted, is its capability of producing a wider array of products.
The burger giant’s U.K. outlets recently added two of the mini sandwiches: Little Tasters, or smaller-sized cheeseburgers served on a mini ciabatta bun, and the Little Italian, the same thing but with a sausage patty replacing the hamburger patty. Prices aren’t listed on McD’s website for the U.K., but you can get the rest of the lowdown here.
McDonald’s Corp. CEO Jim Skinner cited the Little Tasters as a “fourth tier” to the chain’s menu, sandwiched price-wise between bargain items and core selections like full-sized single burgers (the other tier apparently consists of premium-priced choices.) He cited the additional example of a new product marketed in France, the Petite du Jour.
As Restaurant Reality Check reported earlier, Burger King’s U.K. stores started selling a multiple slider meal in May 2008 called the Angus 6 Pack. Last month, another type of slider, called BK Burger Shots, was introduced in some U.S. stores. Two Shots are sold as one order, for $1.49.
In a conference call today with financial analysts, McDonald’s officials didn’t say if the sliders now available in Great Britain might show up on this side of the pond. But Skinner noted that about 75% of units in Europe are now outfitted with a kitchen package called the Bridge Operating Platform. One of the new set-up’s strengthens, Skinner noted, is its capability of producing a wider array of products.
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