Article
How to sidestep the five pitfalls of recession recovery
A branding expert offers insights on how brands can avoid the mistakes the "other guys" make.
June 6, 2010 by Lori Walderich — CMO, Top That! Pizza
It's been hard for restaurants to see this recession as an opportunity. But an opportunity it is. According to BusinessWeek magazine, 70 percent of companies that invest in new product development and advertising during a recession keep the gains they earned.
On the other hand, more than 70 percent of companies that pull back in an economic downturn maintain their losses.
Let's read that again: maintain their losses. These companies don't just recover more slowly. They don't recover.
Case in point, Circuit City after the dot-com recession. When difficulties hit, the company downsized, retrenched and quit spending. Then, for six years, Circuit City stores floundered while competitor Best Buy kept promoting and adding product lines and employee training programs … and kept beating the stuffing out of Circuit City. The contrast between the business models was stark. And then there was no contrast because Circuit City was gone.
In the restaurant industry, it was casual dining chains Steak and Ale and Bennigan's, both of which scraped through the Sept. 11, 2001-induced downturn with business strategies defined by budget cuts. By this recession, they were too winded to outrun it and called it quits. Both have stated intentions of returning as revived concepts, but their odds of success are infinitesimally small.
It remains to be seen how shrinking concepts such as Fazoli's, Country Kitchen, Johnny Carino's and others will fare as the economy recovers. In each case, the chain has shrunk, cut budgets and crimped the innovation pipeline.
So now, as they come out of the worst recession in at least a generation wanting something fresh, upbeat and interesting, what are the odds that diners will choose a chain that looks weather-beaten, patched up and held together by baling wire after a long and bumpy trip?
We'll soon find out. After 10 previous months of negative numbers, restaurant operators are starting to heave a sigh of relief that things could finally be turning around.
But should they?
That depends. Concepts that, during the downturn, have invested for growth — through research, product and menu development and innovation; through employee training and advancement, promotions and facility upgrades — will have reason for optimism. But those that have retreated to a defensive position of downsizing and budget cutting will find themselves in less cheerful circumstances.
So, does that mean they're out of the game?
Not necessarily. With a slow recovery forecast, there's still time for lagging concepts to catch the upswing if they act quickly and with confidence. Of course, this won't come naturally to many of them or they wouldn't be in their current position.
As a first step, decision-makers will have to adjust their operating style — possibly the most difficult change they could be asked to make. But successful management coming out of a downturn will be distinguished by the absence of delaying and second-guessing that typify inaction and precede lost opportunity.
Successful turnaround management also will be marked by the nimble-footed avoidance of obstacles that will trip up their competitors. Successful managers will do five things that others fail to do:
1) They'll become intimately acquainted with their customers. Even in normal times, this should be a given. But a surprising number of established chains resist taking the time or going to the expense of carrying out tailored research into their target audience. Instead, they might choose to do one of several things.
- Assume that their customers feel just as they do about the concept, and make choices based on their own preferences
- Suppose that their customers are can be defined by general demographic information, or composited from the characteristics of users of similar concepts
- Opt for decision-making based on the customers they think they want, rather than those they already have, risking alienation of their current customer base
A case in point is a study IdeaStudio carried out for one restaurant concept whose top management believed that the chain's practice of making sauces fresh from scratch daily was a defining characteristic among its core customers. But focus group research repeatedly revealed that customers didn't even believe the claim. Management was forced to admit that they'd been promoting the wrong benefit to their core customers. The chain revised its message and benefited from that change.
For any concept, a clear path to customer satisfaction, positive word of mouth and continuous growth from the core depends on a clear understanding of customers' wants and expectations and a complete process of delivering the experience customers seek. And there simply is no shortcut around doing the thorough research that illuminates the customer in full detail.
2) They'll freshen their promotions. It's predictable and understandable that restaurants would want to reduce their advertising and promotion costs during a business downturn. However, "understandable" and "advisable" are, in this case, worlds apart — especially when the effort involves reusing or recycling old ad campaigns.
This is a false economy for a couple of reasons. First, these promotions hit diners at a point when they're really starting to feel "frugality fatigue." Consumers are still wearing last year's styles and saying no to big, expensive household purchases until they feel a little more financially secure. The last thing they want is another reminder that everyone feels beaten down — even one of their favorite restaurants, which sadly cannot even afford a new TV spot.
In addition to the demoralization factor, there is the simple truth that human beings crave "new." And this applies in both good economic times and bad, perhaps especially in bad times, when "new" and "affordable" become an especially enticing pair of benefits.
Together, all of this means that restaurant customers will be more attentive and alert to messages, ideas and products that stand out as new. Forward-thinking restaurant concepts will take advantage of these circumstances to gratify their customers' senses and emotions with fresh and appealing messages and promotions.
3) They'll chart their own course. When Subway launched its "$5 Footlong," Quizno's followed suit shortly thereafter with its Torpedo sandwich. By making its new offering an inch longer and a dollar cheaper than the $5 Footlong, Quiznos clearly hoped to one-up Subway, siphoning off attention and traffic from the larger chain.
The Torpedo did get attention, but it was not quite the kind that Quiznos executives might have hoped for. Their "me-too" strategy was not lost on savvy bloggers and food critics. Both groups invariably drew an unfavorable comparison to Subway's already famous $5 version, which notwithstanding its shorter length, was considerably larger overall than the Torpedo.
As one online commenter observed, "Maybe they need a catchy jingle. (But) "'Four dollar — four dollar — four dollar Torpeeedooo' doesn't have that ring to it."
Fair to say, Subway did not get to be No. 1 franchise in Entrepreneur magazine's Top 500 list through a strategy of imitation. Domination thrives on differentiation … and a chain needn't be enormous to do that, just innovation-minded.
Successful chains will realize that, as with promotions, new products coming out of this recession must be interesting, appealing and entirely unique.
4) They'll fully commit to their choice of direction. Five taglines in about five years is not a good record for any restaurant chain. For KFC, it indicates a troubling lack of identity and direction.
Despite a monumental misfire with the company's grilled chicken giveaway coupon and some harsh criticism of the product itself, KFC at first seemed determined to stay on message and on plan to introduce new and innovative products. The company took the knocks that came with its rocky "Unthink" launch and carried on with plans to roll out the Double Down sandwich.
This was the right choice. Unfortunately, KFC followed the Double-Down campaign with a complete change of direction, with the late-May introduction of its worldwide tagline "So Good."
So confusing. Does KFC no longer intend to be a product innovator? Are consumers to assume that KFC's healthier grilled options were a fleeting promotion and not a change in focus? Should they just go back to thinking of the chain as a fried chicken outlet or are they now something more? What does KFC want to be? Just as important, what do they want consumers to think they are?
Even the company's executive VP of marketing and food innovation admits that KFC has been "inconsistent" and "impatient" in its ad strategy. So why should they expect patience and loyalty from core customers who have been jerked around while KFC attempted anything to bring in new diners?
Given the company's continuing lackluster U.S. sales, the answer seems to be, "they shouldn't."
5) They'll plan. They'll have to if they want to achieve items two, three and four. And if a chain doesn't intend to plan, there's no point in even bothering with item No. 1.
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We are perpetually amazed by the number of concepts we encounter that don't (or don't seem to) have an explicit plan for capitalizing on a growing economy. Many apparently assume that "a rising tide will lift all boats." But this is only true of boats that have used their time in dry dock to improve their seaworthiness. The tide is no friend to a ship with a gaping hole in the hull.
Chains must use planning time to explore, understand, adjust and anticipate. In doing so, they will find greater efficiencies in almost every area of business.
For instance, one client we worked with agreed to start mapping out marketing promotions a year in advance. As a result, they were able to shoot still photos and TV ads all at once, saving a tremendous amount of money on shoot planning, travel and personnel. They developed a logical, scheduled approach that offered interesting dining choices throughout the year and kept customers interested and engaged. Not by accident, the chain saw a substantial increase in year-over-year sales following implementation of the plan.
With systematic planning, chains can achieve countless efficiencies — from optimizing back-of-house operations and, balancing daypart traffic to finding more time to spend on building meaningful customer relationships, loyalty programs and experience upgrades.
Advanced planning allows a concept to focus on the bigger picture, rather than drop-dead dates for details such as employee training and table-tent printing. And importantly, it provides the luxury of distance from the day-to-day, which allows management to observe how things are really working at the top level, and to tweak the plan as needed to keep it aligned with customers' changing perceptions and desires.
There is no magic to it. The chain that will snap up the biggest share of disposable dollars returning to the restaurant market will be the one that knows its customers best, that caters to them most obligingly, attracts them most effectively and communicates with them most consistently.
As for the "other guys" without a plan? They do have one, whether they know it or not. Their plan is to stay smaller.
Not having a plan is, in itself, a plan. However, "maintain our losses" is a plan that no restaurateur in full possession of his or her mental faculties would commit to paper. Nevertheless, it's a mistake that many will commit.
*Lori Walderich is chief creative officer for IdeaStudio, a marketing company specializing in chain-restaurant marketing and promotion.
About Lori Walderich
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