How Does Today’s Foodservice Consumer Define Value?
Working through a shifting definition of value, quality and ambiance
How does the average foodservice customer define value? Is it just low price, or is there more to it than that?
All signs point to a shifting definition of value, one connected not only to price but also to service elements, quality and ambiance.
This is important because restaurant visitation is down over the past year, a finding pointed out by Technomic in its 2017 Top 500 Chain Restaurant Report, powered by Ignite, and reflected in part by the 1.6% decline in same-store sales growth at leading restaurant chains. When traffic dips and people start thinking about sourcing meals and snacks beyond prepared foods, it’s often because they can’t see the value of dining out or buying prepared foods to go.
Previously, a struggling economy led more consumers to eschew retail and restaurant foodservice in favor of their home kitchen. A rebounding job market has certainly nudged more consumers back to foodservice, but along much different avenues. Today, a plethora of emerging meal solutions—such as the rapid growth of the $1.5 billion meal-kit industry, according to stats from Rockville, Md.-based Packaged Facts—has given consumers new ways to identify and define value.
This means a strictly price-focused value approach is starting to give way to other considerations. “Operators will increasingly focus on value that is driven by quality, service and convenience to meet rising consumer demand,” says Kelly Weikel, director of consumer insights for Chicago-based Technomic.
In response to the changing landscape, restaurants are emphasizing a stronger message around value. It’s behind the increase in convenience-oriented service platforms at full-service restaurants, such as curbside delivery formats and mobile ordering. It’s also why there’s been a surge in two- and three-for meal bundles at casual-dining chains as a way of spurring repeat visits.
In the limited-service arena, industry leaders are hustling to incentivize repeat visitation with price reductions on mix-and-match combo meals. Wendy’s is marketing a four for $4 deal, while Burger King’s four items for $3.49 drops each offering below a $1 price point. These promotions are communicating value beyond just a rock-bottom price—they’re also emphasizing the ability of the customer to choose the components of their own value meal.
Convenience stores are another story. It’s clear that retail customers expect c-stores to be true to their name and deliver on speedy transactions and an in-and-out visit. But in a competitive environment in which many channels are elevating their foodservice programs, c-stores can’t rely on convenience alone. Consumers have higher expectations for c-store food quality, variety and overall experience than ever before.
Foodservice-centric c-stores recognize that speed is at the heart of the larger customer experience, but it’s not enough to effectively snag traffic. “Our customers are just a little bit more in a hurry than the average fast-food customer is,” says Rich Green, director of foodservice for Maverik Inc., Salt Lake City.
“The primary driver is still convenience, but if you can offer them better-quality food than they would get at a QSR, you’re in a better position to win some share of fast food’s traffic.”
Generally, consumers say c-stores’ overall value equation is solid. In fact, 41% of c-store visitors surveyed for Technomic’s 2017 Value & Pricing Consumer Trend Report, powered by Ignite, said they’re either “satisfied” or “extremely satisfied” with the value equation of c-store foodservice.
For retailers meeting that value expectation, the first step is to pinpoint what their distinct customer demands. For some leaders in the segment, a convenient experience is paramount.
“Good value is about fulfilling our mission of making people’s lives simpler and more enjoyable,” says Robby Posener, vice president of marketing, merchandising, design and construction for Atlanta-based RaceTrac. “For our guests, that lives at the intersection of having the right product in the right place at the right price and meeting their definition of convenience.” At RaceTrac, this means balancing high-quality ready-to-eat offerings for the grab-and-go guest with promotion of customizability, via made-to-order pizzas and sandwiches.
There’s also the premium factor to consider; for customers who have higher expectations for quality, RaceTrac promotes handmade milkshakes and cookies baked in-house.
“Value is not a one-size-fits-all approach," says Posener. “We strive to allow the guest to experience our stores in a way that suits their definition of value, which will motivate them to visit us over and over again. The better we understand the demands of who is walking in the door, the more convenient we can make that shopping experience—which is the need state we service best.”
“Who is walking in the door” is quickly evolving at c-stores. Millennials—and increasingly, their younger counterparts in Generation Z—are guiding everything from menu innovation to technology and store design.
Low prices are a top motivator for millennials and Gen Zers to visit c-stores, but data suggests that other factors weigh more strongly into their value perception of c-store foodservice. In fact, analysis of generational data shows that among the 33% of consumers who cite price as a defining value element, older c-store consumers are more likely to call price their leading value attribute.
This finding has reached the store level for some retailers. “I would argue that the definition of value is changing by generation,” says Ryan Krebs, foodservice director for York, Pa.-based Rutter’s Farm Stores. “Value to the baby boomer means what is the most economic. Value to the millennial and Gen Z customer means they’re willing to pay almost any amount for quality and the experience.”
To appeal across that generational spectrum, items on Rutter’s menu are priced from 59 cents for a snack to $19.99 for a bundled family meal. “We provide items that cover everyone’s definition of value,” says Krebs. To help customers define it in the simplest terms, Rutter’s offers a value menu featuring 50 items priced from 99 cents to $1.99.
But whether its offerings are priced on the high or low end, from Rutter’s perspective, food quality is key. The company directly defines its quality standard as “fresh-made food designed by you, prepared by us.”
Bread and other baked goods prepared daily on-site, fully customizable toppings, sandwiches made in four minutes or less, and an overarching theme of freshness and variety all play into the brand’s value message. Value is communicated to the customer as “quality for what they pay,” says Krebs. “When a customer senses you’re changing products to ‘value engineer’—or in other words, lower quality for higher margin at their expense—it sets a standard for an entire program. Top-quality food and service should be communicated with no question marks to the customer. Full transparency and standing behind a quality-first approach will convince the customer they’re getting what they pay for. It’s when a customer feels slighted or shortchanged on quality that their loyalty begins to diminish.”
The quality component is connected to food integrity: keeping hot foods hot and cold foods cold, maintaining texture and providing secure packaging. But it’s also connected to food and beverage uniqueness, variety and customizability.
“Recognizing that people have different motivations will create opportunities in the market that allow for creativity and the chance to deliver on our guests’ needs,” says Posener of RaceTrac.
In RaceTrac stores, the quality message is conveyed via fresh grab-and-go fare that’s delivered daily, or through custom sandwich and pizza offerings that are now available in newly remodeled stores. At Maverik, it’s the impetus behind the brand’s investment in new service formats that tout variety and a build-your-own positioning, including made-to-order pizza and customizable Mexican-style handhelds.
For convenience-store foodservice, price-oriented specials and promotions will continue to be the cornerstone of the value equation. But for trendsetting retailers looking to gain share and build a winning foodservice platform around value, quality and experience must be central parts of the narrative.
“Someone can charge 99 cents for bad coffee, but it’s still bad coffee. And if the customer doesn’t want bad coffee, that price point won’t bring them back,” says Krebs of Rutter’s. “The emerging customer is willing to pay for quality products and a memorable experience. That, in my opinion, is what they value most.”