MCA market insight director Steve Gotham analyses consumer use of promotional deals and suggests they may not as damaging as first thought. 

It is a reasonable expectation that in a tightening market where discretionary spending is coming under pressure, more operators will be thinking about stepping up promotional activity to better incentivise more punters to come through the door.

In a world where the use of stealth and off-menu marketing is on the rise, alongside more sophisticated management of more targeted promotional offers and cleverer tracking of results, keeping tabs on this changing activity is no mean feat. One response is to focus more closely on scrutinising customer behaviour and how this might be changing, and helpfully, MCA’s Hot Topics and Eating Out Panel survey trackers include several consumer perspectives around promotions.

It might surprise some, but a hefty 27% of UK adult consumers looks to use a promotional offer of some form every time they eat out. What with a further 16% using a promotion most of the time, then UK adults are by no means reticent about taking advantage of an offer. Unsurprisingly, it is younger adults who are the most switched on to deals. The 27% every time average rises to 42% in the case of 18-24-year olds as they look to make restricted incomes work harder to support their typically high eating out frequencies. In terms of gender differences, it is also conspicuous that females appear to be far more offer-savvy than men, who might possibly benefit from a budget stretching lesson or two.

While it is difficult to be definitive about the changing availability and generosity of promotional deals on offer to consumers, from a consumer perspective, the direction of travel would appear to be with more, rather than less, promotional uptake. When asked about the extent they are using offers and deals more/less often than six months ago, 24% of consumers said more and only 11% less. Again, both younger adults and females over-index in terms of increasing usage. Eating Out Panel data also confirms rising promotional usage over the past two years, and across all day-parts.

Thus far, we have treated promotional usage somewhat generically. Using insights from the Eating Out Panel it is possible to better understand more about the changing mix of promotional types. Focusing purely on lunch, easily the most popular eating out day-part, the most popular promotional mechanic used is the meal deal, at just over 20% of occasions. While the share of this offer type has declined slightly year on year, market evolution is clear in the notable rise in usage of promotions via email, mobile apps and social media. These have convenience benefits for consumers and cost savings for operators, and look set to increase in participation further as the digital advantages become more widely appreciated and utilised.

Digging deeper still, what is particularly interesting is when consumer spend with and without a promotional offer is compared. The Eating Out Panel data indicates an average spend of £8.40 at lunch with a promotional deal, some 6% higher than the comparative without. This differential increases further at dinner, rising to 13%. This suggests that operators are also getting savvier about using promotional mechanics to drive spend and not just footfall.

In truth, many operators have amassed significant experience at running assorted promotional initiatives now, so perhaps impacts on profitability, particularly for those in high gross margin segments, might not be quite as damaging as might first be anticipated?

Indeed, given the highly uncertain market prospects over the short-medium term, evidence of operators becoming increasingly tooled up when it comes to promotional mechanics, and more adept at deployment, is a positive finding. I might also say it highlights far greater internal clarity than the murky impressions from assorted email campaigns might suggest. That said, the cyclical truism of every solution eventually bringing around a problem cannot be ignored. There are undoubted risks to a long-term high-low pricing strategy that can undermine consumers’ value perceptions of brand propositions and which can open up more opportunities for ‘everyday lower price’ practitioners. Lessons from the world of grocery retailing would suggest there is significant potential for share gains from decent quality, but price-led operators.