My Two Cents

At last week's National Restaurant Association Marketing Executives Group (MEG) conference, Red Mango founder Dan Kim's keynote was, well, a real treat. Kim’s marketing strategy is quite elegant, and there was even something for a pricing aficionado like me. And why wouldn’t there be – it was a marketing talk, after all.

Kim attributes Red Mango’s growth to three principles:

• Respond to customer trends with prediction and innovation
• Deliver value uniquely
• Let customers own and shape our brand

My annual tour of casual dining restaurants is underway, and this week a restaurant manager told me that his location has not raised prices in about three years. When clients tell me this, it sometimes comes as a surprise. This isn't because holding prices flat is wrong. Following pricing the way Intellaprice does, however, I know prices go up more frequently than every few years in most cases. In addition, I work with clients who often seek guidance on increasing prices in the face of rising costs. And as a consumer, I'm keenly aware of changes in the price I pay for goods and services. So it stands out when a merchant tells me he or she has not taken price in years.

Au Bon Pain Lobster Sandwich; Photos: L. Kerr

In New England, everyone's a lobster roll connoisseur. You can't shake a stick without hitting one, and some of my best friends are lobster roll experts. Heck, even I, a Florida native, overcame my lobsta-ignorance and revel in the joy of good lobster rolls, especially during summer. Gone are the days when I questioned why they aren't called lobster salad sandwiches. You just go with it. Everyone here can name their favorite lobster roll spot, or opine on which lobster shack's rolls are the most authentic. Those in the know are well aware that for high-end rolls you go to the North End's Neptune Oyster or the South End's B&G Oysters and pay $25 for their mouth-watering creations. The less lofty among us are just fine with James Hook's Best of Boston for $11.99, or one at Sullivan's in Southey for $9.95. But I'm not interested in any of those today; today is about lobster rolls gone QSR and Fast Casual! 

Talking with a client yesterday, I had to ask about the company's incremental pricing. Incremental pricing has various definitions, and I use it to refer to the additional price a customer pays to purchase the next larger size of an item, or in this case, the difference between one variety of a product and another. So much impact on restaurant sales and profit is at stake with this extremely simple aspect of the menu.

May is NRA time, and it's also Spring MEG time. So there is much for restaurant folks to buzz about. As always, the MEG conference was chock-full of fascinating speakers. Here is the readers' digest version of the meeting and my key learnings.

Lately, the restaurant industry buzz is all about price increases in the wake of rising commodity and fuel costs. Operators are determined to cover their costs, and want stakeholders to know that profit is the goal - in addition, of course, to guest service. I understand the need to achieve financial goals and stave off downward-turning profit. And it's true that a price change will have the most direct bottom-line impact of any marketing or finance decision a company can make. But there are some instances in which a price reduction may be warranted.

Robyn Benincasa - photo by L. Kerr

Once in a while, a speaker just captivates you and you can’t stop thinking about her message. Robyn Benincasa was that speaker for me this week during the Women’s Foodservice Forum (WFF) annual conference. So rather than ooh and ahh about the wisdom-of-outgoing-chair-Maureen-Hurley/admiration-for-incoming-chair-Carin-Stutz/supportivness-of-WFF-president-Fritzi-Woods/impressiveness-of-Ivanka-Trump/humor-of-Bertice-Barry/motivation-of-Peter-Sheahan, I’ll focus on Robyn. Robyn embodies the very mission of the WFF; the fact that her session hit the nail on the head was as much an epiphany for me as were the lessons she imparted. I know I risk losing something in translation but will try to do her talk and her spirit justice.

One quarter into the year, it seems that the optimistic notes that January brought with it are a thing of the past, and restaurant reality has set in. Operators are extremely concerned about the double whammy of rising fuel costs combined with increasing commodity costs. Add in the earthquake and tsunami in Japan and it's a triple whammy. So what's an operator to do? If the murmurings I hear are any indication, pricing analysis is now on the front burner for many restaurant operators. While that's not the only option available, it seems that it's one of the most popular.

In my last blog, I promised the low-down on my recent restaurant pricing review meeting, and I'm here to make good on that promise. Having been through this exercise many times, I had a good sense of what to expect, but there were some new twists as well. What started out as a case of "the more things change, the more they stay the same" ended with some pleasant surprises. 

This week I presented pricing data to a client and some of its franchisees as part of a pricing review. It was a good opportunity for a discussion around restaurant pricing, and now it's a good opportunity to share some thoughts on why restaurants should hold pricing meetings and how to conduct such gatherings.