Are LTOs Still Worth the Effort?

CHICAGO -- Limited-time offers (LTOs) grab customer attention, shake up an everyday menu and can underscore a variety of flavors and preparations. As a promotional tool, they've been effective in driving seasonal interest—particularly for convenience-store dispensed-beverage platforms—and can be part of a successful marketing tie-in with c-store loyalty programs.

The appeal of LTOs—an opportunity to get new customers in the door and increase visits from regulars, as well as the accompanying boost in checks and sales—is clear. But the cost in dollars and development time, additional SKUs, staff training and marketing can make their value a little cloudy. Those factors were a key reason Darden CEO Gene Lee gave for Olive Garden cutting back on LTOs during the fourth quarter of 2017—a move that contributed to the brand’s stronger performance, he said in a recent earnings call.

Olive Garden ran one fewer promotion in the fourth quarter, eliminating the need to bring in extra product. Instead, it lengthened the run time of the others, with the hopes of re-energizing the LTO mid-promotion, Lee said. That strategy, along with the chain’s never-ending pasta promotions (which require no training and no new products), are proving effective. But some chains see value in running more varied, frequent LTOs to appeal to different customers.

Read on to uncover the key considerations restaurant chains are using as they strategize around LTOs, courtesy of our colleagues at Restaurant Business ...

Black Angus Steakhouse takes a multipronged approach to limited-time offers to deliver a positive ROI, said CMO Liz Geavaras. The 44-unit chain recently expanded on its two existing types of LTOs, which run about nine times a year. To target value-conscious consumers, Black Angus runs four discount-based promos a year. Seasonal LTOs, scheduled about five times a year, play up timely ingredients and flavors. David Bolosan, director of product innovation for Black Angus, develops these specials to showcase menu creativity.

“We were reaching only two guest databases with these efforts,” said Geavaras. So Black Angus started mixing up these longer-term LTOs with one-shot deals, targeting its Prime Club loyalty members and social media to build awareness.

There's no doubt short-term LTOs can create a lot of buzz and demand; Arby’s Venison Sandwich is a prime example. But at Habit Burger Grill, LTOs serve a different purpose, said CMO Matt Hood. The fast casual’s LTO strategy is to menu “something other than burgers, to introduce items that expand the reach of the brand,” said Hood. Habit has found success with traditional long-term specials that can take months of R&D and test marketing to work.

“We run a handful of LTOs a year, with most in the six- to eight-week range,” he said. “This length of time allows our regulars to try them a few times in the cycle.”

Bumping up traffic and sales with minimal operational complexity is the ultimate test of a successful LTO, Hood said. For the Golden Chicken Sandwich, which later moved to the permanent menu, Habit had to gauge the effect on each store’s fryers and nail down exact cook times. Even something that seems as simple as a salad requires training on the build and packaging for takeout.

The training needed for LTOs also cuts into profitability. Minimizing training is the main reason Logan’s Roadhouse has cut back from four limited-time offers a year to three, said Luis Haro, director of culinary operations.

“For Lent, we ran a seafood special with the highest-priced entree at $16.99. People are spending less in February,” he said. But from October through the holidays, spending surges, Logan’s has found, so more expensive steaks are featured.

“If something doesn’t work out, we muscle through anyway,” said Haro. “We still have printing costs [for marketing materials], photography costs and sometimes extra SKUs we’ve paid for.” But there are more winners than losers, and Logan’s LTOs do what they’re supposed to do: boost traffic and drive sales.