Wednesday, May 12, 2010

Free Roast Beef Sandwich

This is a rant about Arby's, but like all of my rants I dig into the business reasons of where the mistake was made and what was lost.


As a special treat last week I decided to take my daughter out for a fast food lunch.  We don't do this often, and I figured this would be an opportunity for me to demonstrate to her that new foods can be delicious.

A quick look through my Entertainment Book revealed there was a coupon for Arby's.  The coupon was, "Free roast beef sandwich with purchase of roast beef sandwich of equal or greater value."  So I put her in the car, and started talking about how wonderful roast beef sandwiches, and how when I was little, we would all meet at the local Arby's (then Rax) after softball practice. 

By the time we arrived, my 3-year-old daughter was willing to give it a try as long as she still could get fries.  We waited in line, she picked out what she would want to drink, and I got to the counter and requested a deluxe roast beef sandwich for myself and an "Adventure Meal" for her, with kids size roast beef sandwich.  Apple sauce for her, curly fries for me (she could try some of my fries; they no longer carry regular fries at that location), I was given the total, and I presented my coupon.

"I'm sorry sir, but the coupon doesn't apply to kids roast beef sandwiches or to deluxe ones.  It only applies if you buy two basic, adult-sized roast beef sandwiches." 
"But you're only losing about $2 for a kids sandwich.  Normally you would lose $5."
"Sorry, sir but those are the rules.  The coupon is only good for an adult basic roast beef sandwich."
"She won't eat a full-sized sandwich even if I do downgrade mine to the basic.  Can I speak to a manager?"
"I am the shift manager."

I could have given in, and probably would have if other alternatives were difficult to get to, but I was standing in a food court in the middle of the Great Mall.  There are lots of other options, and most businesses are hurting.  Especially during lunch time on a weekday.  I suppose Arby's doesn't need my business that badly, or they want to call my bluff.

"Fine.  Then cancel the order."

The "manager" sighed and then proceeded to clear out each item individually as we walked across the food court to McDonald's.  I paid the same amount as I would have paid full price at Arby's, but I was offended that Arby's wouldn't honor my coupon, especially since I was willing to buy something more expensive than the coupon required.  My daughter did try her cheeseburger -- about 3 bites.  Oh well.

Marketing & Promotions Best Practices

Back to marketing and product management, which is what this blog is all about:  a coupon is a company's willingness to negotiate in hopes of an upsell or repeat business that will make up the cost of the promotion.  It forces the buyer to become aware of a business in their area and to try something new (as Mom always said, "try it, you'll like it!").  Buy 1 Get 1 promotions specifically are most effectively used to thin out the inventory and minimize inventory losses, though for the Entertainment Book it's usually the reason already specified above -- they want at least two customers to try something new, hoping they'll try it again.

For many promotions, the service staff then suggests an upsell option that offsets the cost of the promotion.  For me, Arby's didn't even need to convince me to upgrade; I had already chosen my upgrade; cheese-flavored sauce does not cost them the $0.75 per sandwich I would have paid (more like $0.10 if that), and they had the opportunity to lose less on the second sandwich than they ordinarily would have. 

How much more would it have cost Arby's to build infrastructure to handle more flexible coupons?  Not much.  In fact, they could have written it off as a free kids meal to make it easier on the cash register.  Here's what Arby's lost:
  • If my daughter had liked Arby's sandwiches I would have brought her back a lot more often.  Some kids are picky eaters, but at least my daughter isn't shy about saying what she wants.  If she said "I want an Arby's" I would be happy to go out of my way to get her one to encourage her experimentation with new foods.
  • I now doubt they'll honor my other Entertainment Book coupons, so additional marketing dollars spent on me will be wasted.
  • My daughter remembers the food court as the place where she got that Happy Meal toy at McDonald's and will no doubt request McDonald's next time too.
Willingness to pay has changed over the past two years.  Companies who don't adapt will find it hard to get customers.

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