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Are you following these 5 must-dos when launching LTOs?

Whether you're a small QSR chain issuing your first promotion or a large QSR that has been running promotions for years and are now looking to introduce something new or make changes to your promotions strategy or increase success, there are things you can do. Here are five tips to bolster their success.

September 23, 2015

By Pat Sullivan, HAVI Global Solutions

Limited-time offers and promotions are common QSR marketing concepts that can take any number of forms — a special price point, new menu item offering, popular flavor combination and even the bundling of products. The tenets of a successful LTO or promotion are an appealing product, an attractive price and availability. Generally speaking, people are curious about new news. If QSRs have the right media or in-store advertising for a new product or promotion, they will generate consumer awareness and curiosity in the offering. If they offer a quality, enticing product and price it right, they likely will generate sales. Finally, if they correctly anticipate and plan availability of the product, they can expect to see positive return on their investment.

How can QSRs ensure they hit each of these targets? The answer lies in effective planning. To paraphrase Benjamin Franklin, failing to prepare is preparing to fail. Jumping on the latest promotions trend without first considering the impacts of the promotion across the supply chain or developing contingency plans could actually prove detrimental in terms of lost profits and brand reputation. Here are five ways QSRs can increase the success of their next promotion or LTO.

1. Weigh the cost benefit of running a promotion or LTO. Consider what you are trying to achieve from a profitability standpoint in light of the investment you are making to garner incremental volume through a promotion. If you are introducing a new menu item, do you need to invest in new equipment? Will a larger size offering impact packaging costs? Will a discounted product lead to complementary sales during the restaurant visit? It is essential that you look at all of the variables associated with a promotion and weigh their costs against profitability goals. A promotion might drive up sales and revenue, but if the cost of the promotion outweighs the gain, it is not the right marketing approach.
2. Have an inventory strategy. Will product supply support demand throughout the duration of the promotion? If you cannot reliably support demand throughout the lifecycle of the promotion, adjust media dollars appropriately and manage consumer expectations with "while supplies last" messaging. What about production capabilities? Often, smaller QSRs may only have one chance to procure inventory as their suppliers may not have the flexibility to produce multiple smaller runs throughout the duration of a promotion. Plan for demand and walk through different scenarios, including highs and lows, based on historical sales data as well as the unique DNA of your individual restaurants to predict inventory requirements. Additionally, consider alternative new ingredients or suppliers when contingency planning.
3. Design a distribution plan. If inventory is produced up-front, will you distribute all of it among your restaurants, or supply initial demand and then send replenishment inventory as needed? Assuming you are able to respond to demand with additional production if needed, you may want to invest in raw materials. Even if they are never used, the cost likely would be less than if you had invested in finished goods and found yourself with leftover inventory that could not be sold or repurposed. If inventory levels are low in some stores but high in others, you might consider moving inventory between locations to accommodate the differences in demand, but ensure you weigh the transportation costs against the potential lost sales.
4. Collaborate.A great plan can only be executed successfully when everyone involved in carrying out the plan is aligned on the overall goals and strategy of the promotion. Visibility and communication before, during and after promotions are essential. All parties, from suppliers and distributors to the marketing, finance, business intelligence and restaurant operations teams who help to execute the campaign should be aware of expectations from the outset and challenges that arise along the way. Ensure you are all looking at the same data and adjusting the promotion together.
5. Leverage business intelligence. This is important not only at the start of a promotion in the early planning stages, but also throughout a campaign (e.g. regularly monitoring POS data, inventory levels) and after a promotion has ended. Evaluate the program objectively in light of the goals you set and how closely you met them. Extract key learnings for future promotions. What was consumer response to the program? What factors affected their response? What did inventory levels look like at the end of the program?

Done correctly, LTOs and promotions can help QSRs of all sizes drive sales, bring in new customers and help increase customer visits. The keys to success can be found in planning, collaboration and visibility.

Pat Sullivan is senior vice president of promotions management at HAVI Global Solutions, where she has managed promotions for one of the largest QSRs in the world.