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Fast Food Chain Case Study

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By Tim Scott

December 3, 2020

“You won’t attract new customers, if you don’t try new things.”

8

When something doesn’t change, it gets left behind - this applies to everything, including restaurants and cafes.

Franchises like McDonald’s, Domino’s and KFC understand that to increase profit and drive customer loyalty, they must take things in a different direction. This case study examines why the fast-food industry offers certain specials, such as McDonald’s Monopoly and 30 Days of 30 Deals, and looking at the benefits that come with this method.

Why do fast food chains adopt this method?

The main reason for this type of promotion is to speed up the sales process and increase the volume of sales. McDonald’s is a company that is very well established and makes millions of dollars a year globally through its franchises, as the world’s leading fast-food chain.

While promotional gimmicks were once frowned upon as a cheap method to move merchandise, more and more businesses are going down this path. These chains know that offering exclusive offers on their apps for instance, will prompt customers to download the app and once it’s on their phone, they’re more likely to use and reuse it.

This enables the business to move orders more quickly as they are being made via the app, taking the load off service staff.

93%

Of customers use a coupon, or discount code for purchases throughout the year

55%

Of consumers prefer money-off deals over other forms of rewards.

Businesses also adopt this method because it creates differentiation with other competitors. McDonald’s for instance, is the only fast-food chain that offers the highly successful Monopoly campaign. Why is It successful? Because customers are being rewarded for simply purchasing a meal and given the chance to at least win an instant prize of more food. Instant gratification via apps works well for restaurants designed for quick service.

McDonald’s knows how to market their products and bring people to their app. One of their main objectives for app-only offers is to drive users towards downloading the app. 

In the first two years of its launch, the McDonald’s app received more than 7 million downloads. One of the motivators for this was that users would receive one free item when they downloaded the app. The Monopoly and 30 Days campaign utilise the same promotional strategy to entice customers.

These methods do increase customer loyalty and loyal customers are invaluable. Customers value these specials because they feel like a reward, even when they are paying for an item they would not have considered earlier, the fact that it’s discounted drives them to buy it.

It works like this: 

  1. The consumer gets a notification they can get a burger for $2. 
  2. They will more often than not, take up this offer even if they didn’t plan on buying anything in the first place.
  3. They’re in the door, therefore they are likely to order more items.

According to Upserve, 82% of customers using a loyalty program referred at least one other person. Thus, if you have just 100 customers signed up to the program, that’s an extra 82 customers coming through the door.

30%

Of restaurants have a loyalty program

57%

Of diners are more likely to choose a restaurant if it offers a loyalty program

5%

Increase in customer retention can increase profits by 75%

Value gained must surpass value offered

A rewards program should not give something away for nothing, or almost nothing - the costs gained must be weighed against the costs spent. Fast food chains understand this and knowing how much it costs them per item, predicts how much they can deduct when offering a deal, while maintaining profit. The idea with McDonald’s 30 Days of Deals isn’t that customers will purchase the special offer item, but that they will get it in conjunction with other menu items - it simply gets the customer in the door.

Customer Behaviour

Many of these promotions bank on the idea that customers will spread awareness of the campaign through word of mouth. Also, regarding customer behaviour, a limited offer deal is going to prompt them to purchase an item before the time runs out. There are many studies which link impulse buying to limited time offers; this works in favour of the restaurant, as food wastage accounts for a large expenditure for businesses. 

There is a psychology that comes with receiving discounts that pushes customers to purchase. In a study conducted by Dr Paul J. Zak, a Neuroeconomics Professor at Claremont Graduate University, people who received a discount had a 38% increase in oxytocin, a hormone associated with feelings of satisfaction. 

Furthermore, there was seen to be an 11% increase in happiness and their overall mood increased upon receiving the offer.

Final Thoughts

If you have read this far, be sure to check out the Mobile App section of WOWAPPS site. Learn how you can also harness the benefits and power of your own mobile app and compete with the big fast-food chains. These chains are not able to do anything different than what you’re doing - the only difference is they have the $$ to build the technology behind it. WOWAPPS gives you the exact same ability for less than a coffee a day…find out more here:

About WOWAPPS

WOWAPPS is an all-Australian tech company, dedicated to anticipating the ever-evolving needs of restaurants and their diners. We are committed to helping Australian Restaurants reap the rewards of additional revenue and brand advocacy, providing seamless customer experiences that are more delightful and convenient.

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