Customer at the heart: product and pricing strategies

With increasing financial pressures and a tough climate, casual dining brands strive to balance winning custom with achieving margins. Certainly not easy to achieve simultaneously. We ask how operators can both grow their margins, and entice new (and often price-sensitive) customers, all while maintaining their current customer base and staying true to their core proposition? A good understanding of the audience lies at the heart of the solution. We’re going to focus here on three casual dining chains that have all recently reviewed and refreshed their offers, both in terms of price and product: Wahaca, Frankie & Benny’s and Turtle Bay. Each has adopted a different approach to try to better appeal to consumers, to drive custom and profitability. Leading with innovation Wahaca, the mid-market Mexican casual dining chain, has 25 UK locations, 16 of which are in London. Despite a strong following, serving over three million tacos a year, it is not immune from the troubles experienced by F&B brands on the high street – its Soho location recently underwent a rent review and now faces an extra £1m per year of costs. Keen to adapt and stay relevant, it recently opened a test kitchen in Shoreditch where diners are asked for feedback on new dishes via at-table tablets post-meal. Off the back of this, Wahaca refreshed its menu across the estate earlier this summer, with a greater focus on more exciting options, aiming to demonstrate that ‘Mexican food can be fresh, delicious and healthy’. With this came an increased number of vegetable-based options, to appeal to today’s health conscious consumer – something that diners were not demanding even just a few years back. Wahaca founder Thomasina Miers notes: "The nation is whole-heartedly embracing Mexican food. Where we were once cautious about pushing the boundaries too much we are now excited about how much we can offer in terms of flavourful, healthy, vibrant food." Comparing Wahaca’s current menu to a year ago, we see increased duplication of meal components and repetition of ingredients across multiple dishes. For example, Wahaca’s ‘Pork Pibil’ which had been available in both taco and burrito form, is now also available as part of a healthy ‘Mexican bowl’. Similarly, three of the 17 street food options on the new menu contain feta as a main ingredient, grilled chicken and avocado appears as both taco and quesadilla, and another three of the 17 dishes contain sweet potato as a main component. It’s fair to assume that this move will help improve margins for the business, with favourable economies of scale in purchasing ingredients. This also ties in with the brand’s strong ethics and market leading stance on reducing food waste, as each ingredient may be potentially used across multiple dishes during its limited shelf life. The inclusion of more vegetarian dishes ties in with broader trends of reducing meat consumption, but with some vegetarian dishes also being accompanied by 5-8% price rises year-on-year, some may be left questioning value for money in this tough market. Wahaca has played with the product, and to a lesser extent the price, to improve commercials and reduce waste, and time will tell if this refreshed proposition will reap the commercial benefits and resonate well with diners. Focusing your offer Frankie & Benny’s, the family-focused American-Italian casual dining chain, has taken a highly customer-centred approach. Following its well-documented troubles in 2015-16, when business performance was impacted by price increases and declining service levels, owners The Restaurant Group implemented a series of initiatives to re-establish the competitiveness of the brand, which included closing scores of locations. The menu was refreshed to reduce the breadth of the range, introduce ‘value’ price points, increase the number of healthy options and create appealing offers such as ‘Mums Eat Free’ or ‘Kids Eat For £1’. The streamlined menu and targeted promotions were designed to resonate positively with families on a budget. Whilst the new range is certainly more focused, and contains better choices of healthy and gluten free food, it remains to be seen whether this rationalised menu will have sufficient appeal to customers, and whether it will serve a sufficient variety of customer missions, such as group visits, quick snacks, family dinners, and lighter lunches. Menu hacking Meanwhile Turtle Bay, the Caribbean themed casual dining chain conceived in 2011, has recently relaunched their offer across their 40+ sites, with a focus on ‘menu hacking’. Main meals which formerly included sides have been pared back and reduced in price, to improve perceptions of value for money and allow customers to combine them with the side of their choice to create their own ‘perfect’ meal. The selection of sides has grown to around 20 choices, which cater to a range of different dietary preferences (e.g. vegan, vegetarian, low carb, gluten-free, paleo). These form part of multi-buy offers (two for £5.40, five for £12 etc.), as do starters. This encourages sharing between members of a party, helping facilitate the relaxed and communal atmosphere which the restaurant promotes. The incentive to trade up on multibuys increases the ATV as well as unlocking incremental spend from customers and missions that were previously less well served (e.g. larger groups, those with more specific dietary requirements, indulgent splurge, lighter lunch). Reinvigorating the menu has been accompanied by operational changes such as the introduction of service to drinks tables, a move designed to reduce times spent in queues at the bar and enable those visiting mainly for drinks to also buy food. This positively impacts on dwell time and spend. So, for Turtle Bay, the product offer has become more complex, with an increased number of menu items available. But, the customer sees improved value and greater relevance in the offer, meaning the business has likely been rewarded with increased spend, whilst growing its appeal to new customers and occasions. What is clear from the examples of Wahaca, Frankie & Benny’s and Turtle Bay is that any developments in the product offer or price architecture must be carefully considered from both a commercial and customer perspective. Whilst some tactics clearly benefit margins or operations, such as streamlining ingredients, any changes must also align with evolving customer wants and needs to ensure long-term success. A rich understanding of customer spending behaviour can help to unlock opportunity to enhance margins where headroom exists. For larger chains, big data analysis can be used to identify elasticity to inform menu pricing. Moving forwards, we certainly expect to be assisting more and more clients with increasingly nuanced pricing and menu strategies, to unlock value in today’s challenging casual dining market. Alex Cook, a senior analyst at business management consultant firm, Pragma