Article
KFC and Taco John's discuss coupon strategy
Despite gift cards' success, coupons still bring in customers.
March 19, 2006
According to the National Restaurant Association, a key competitive advantage for QSR operators in 2006 will be the ability to provide meals at a value. More than three of four QSR operators surveyed by the association expect their customers to be more value-conscious in 2006 compared to 2005. One of the prerequisites to offering value is boosting revenues, the direct result of stepped-up advertising, which has traditionally been spearheaded by coupons.
"Couponing can be used in the relationship market realm to keep them coming back to you," said David Pearlman, marketing professor at the University of South Carolina in Columbia. "They also can be used as a vehicle to get people into your store, and to test the advertising effectiveness."
That's exactly how KFC has used coupons in its marketing strategy.
"KFC's use of coupons has been a very effective way for us to reach our targeted consumers," said Laurie Schalow, KFC spokesperson. "As a result, KFC has seen an increase in coupon redemption over the past few years."
For competitive reasons, Schalow was unable to share KFC's exact redemption rate on coupons. She noted that the rate varies depending on the offer.
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One anti-coupon argument is couponing undercuts sales due to heavy discounting. But coupons don't necessarily have to carry discounts. According to Doug Miller, program coordinator for the Hospitality Management program at Utah Valley State College in Orem, Utah, distributing coupons without a discount attached is a way to fight fire with fire without losing your shirt.
"In a larger community, you don't have to discount," Miller said. "It's purely informative, to let people know you're out there."
Some Taco John's local store marketing generates non-discount coupons to this effect as well. "It's not really couponing per se," Dixon said. "It has more of an incentive to come to the store, where there is a value attached."
Coupons vs. gift cards
The same "incentive" premise is behind gift cards, a hot item for foreseen sales growth in QSRs. Though technically different—gift cards are purchased ahead of time and used to buy meals—the top-of-mind approach to the community is the same. Most marketing strategies, including that of KFC, consider the two as individual and separate elements of a larger effort.
Taco John's is also currently experimenting with gift cards. "We think that there's a great future for them," Dixon said. "In my view, it's a totally different thing than coupons. It's a loyalty device, a way to get a billboard in the wallet or purse of your consumers. Gift cards also enhance speed of service; you get people to come, lay their card on the counter, and—boom—they're on their way."
All in all, Miller sees couponing as a trusted management tool for any segment. "We tell students that you can do effective marketing with coupons. The big advantage is market research—the demographics—where people coming in with different colored coupons, for instance, can be tracked. You know where business in coming from."
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