, Australia

Could meal discounting destroy value and quality?

Find out in part 2 with QSR Media’s interview with four industry and marketing experts on discounting.

Read the first part here
 

QSR Media: Does discounting involve less value and lower quality of a meal?

Merrill Pereyra—Mentor at Start Up & Emerging Ventures: Does not have to be and should NEVER be the reason for the discount.

Steve Hansen—King of Strategy at Think DONE Management Consultancy: It should never compromise the product. If the trader thinks that is the way to compensate then the reality is that they will lose sales because of it. The customers are educated and they expect good quality and good service. You only discount to make some change.

Costa Anastasiadis—Director of ENA Hospitality Group: Discounting can definitely offer value to a customer, without doubt. The question here is the relationship between discounting and quality. Unfortunately, discounting real quality meals will lead to little or no profitability. Quality costs, especially in today's world. For discounting to be effective, assuming the aim is to drive sales and profit, generally one will find quality needs to be at the lower end. With food costs continually rising, discounting in the qsr sector is like playing Russian roulette!

Armina Soemino—Emerging Equities Research analyst at J.P. Morgan Chase & Co.: It shouldn’t have to. As aforementioned, it should be a key priority of any QSR to ensure that there is a clear delineation between the brand message and discounting. Domino’s do this time and time again, most recently with Chef’s Best – where there was a clear branding message towards higher quality ingredients but at a lower price. It appears that Domino’s may be taking share off non-Gourmet pizza QSR rather than Gourmet pizza players in this regard. My take on this is that the normal Gourmet pizza customer has already shown they are not as price-elastic already. Instead Domino’s are allowing those that may have traditionally balked at the higher price of gourmet pizza to now try it for the same price as say a burger or chicken meal. But time (and Domino’s next financial results) will tell if this has indeed been the case.

 

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