Remember the value wars of a few years ago, when quick-service chains tried to one-up each other with lower and lower priced offerings? Then, when it turned out those offerings only appealed to value-seeking consumers with zero brand loyalty, many chains pulled back on the strategy, and, well, it didn’t go well.
Now, the value wars are back and performing way better than before, according to a new study from market research firm The NPD Group.
“They moved away from value and it hurt them,” said NPD analyst Bonnie Riggs. “They needed to refocus on value.”
Among the quick-service chains that have re-focused on value is McDonald’s, which earlier this year began offering new value-menu choices priced at $1, $2 and $3. Similarly, in December 2017, shortly after McDonald’s said it would add new value items in January, Taco Bell doubled down on value offerings, adding seven new items to its Cravings Menu, including $1 Nacho Fries. And Jack in the Box launched “Value Done Jack's Way,” with offerings priced at $1 and $2, as well as meal combos priced at $3 and $4.
“To have that kind of variety and uniqueness is very appealing to consumers,” Riggs said of Taco Bell’s now 20-item value menu.
The concern about value offerings has always been that they entice consumers to order from the value menu. However, in an analysis of the new value-menu offerings from these three chains during the month of January, NPD found that on average, 72 percent of consumers purchasing from the value menu also purchased from the regular menu. Sixteen percent ordered from the value menu alone, and 12 percent ordered value items with other value items.
*Source: The NPD Group/Checkout, January 2018
“The initial hope was to get new and lapsed users visiting again because of the value proposition, but that didn’t happen,” Riggs said. “Instead, heavier users and families with kids took advantage of the value menu.”
Additionally, Checkout Tracking data, which is transaction information drawn directly from consumers’ actual purchase receipts, shows that on average, the value-menu buyers’ visit rates were higher than that of non-value-menu buyers. While their average party checks were less than non-buyers, their frequency of visits resulted in higher overall spend for the month than non-buyers.
Average visit frequency to the three chains for the month of January was three visits for value-menu buyers, compared with 1.6 for non-value-menu buyers. The average party check for value menu buyers was $8.81, compared with $8.34 for non-value-menu buyers.
“It was a successful pricing strategy for these three brands,” Riggs said.
“Chains need a value proposition to stay competitive with these offers.”
Taco Bell offered insight into the chain’s newest value offering, and Checkers and Rally’s shared how the brands are stepping into the latest round of “the value skirmish.”
Taco Bell keeps innovation rolling
Yum! Brands Inc.’s quick-service Mexican chain has been offering menu items for $1 or less since it first opened in 1962.
Taco Bell continues to have success with value items when other brands have failed in large part by constantly introducing ingenious items that customers crave, at prices they feel good about paying.
What sets Taco Bell’s value menu apart from competitors is the chain’s abundant offerings for every meal of the day, featuring different proteins and vegetarian options; flexibility within the menu; and continued dedication to innovating to create craveable items at low prices, a spokesperson said.
In January, Taco Bell launched a Nacho Fries LTO that was its most successful launch ever, outdoing earlier hit Doritos Locos Taco. The success translated into more than 53 million orders of Nacho Fries in the first five weeks following its debut.
The value train will keep speeding along at Taco Bell. The chain plans to bring back Nacho Fries this summer and, in addition to its mainstay value menu, introduce a total of 20 new national and test menu items before the year is out. So far, 10 of those items have been added, including $1 Stackers, $1 Grande Burritos and a $1 Cheesy Crunch Melt.
Checkers and Rally’s hone in on dayparts
While other brands are flexing their innovation muscles, 920-unit Checkers and Rally’s is exercising value-menu customizability and the snack occasion.
“We target the frequent category user. What they want more than anything is great, craveable food for not a lot of money,” said Terri Snyder, chief marketing officer and senior vice president of Checkers and Rally’s. “We’re trying to be relevant at every price point, meal occasion.”
For example, rather than offering the flexibility to choose the size of a drink at a value price, the chain is offering flexibility on the size of a burger, which can be ordered with one, two or three patties.
With Checkers’ and Rally’s afternoon snack traffic almost as busy as lunch, and 22 percent of business occurring during the late-night occasion, the chain is offering more savory and sweet options to meet consumer cravings during those hours, including its new Italian Island Slushies.
“You can win by stepping into these value wars — and we are — but you can also win for the snacking occasions,” Snyder said.