By Vince Sgabellone
Toward the end of 2023, we saw the wave of incremental restaurant traffic slow to a trickle, and traffic growth stabilize in the low single-digit range. That means restaurant operators will need to work even harder in 2024 to entice customers to visit and spend their money amid continued economic challenges. Menu innovation is a long-standing tradition in the restaurant industry. After slowing during the pandemic, innovation pipelines have re-opened in the past year. Limited-time offers, or LTOs, are a key component of any innovation strategy. They create buzz and build variety for customers, which could be a boon to marketers in the year ahead.
A recent report from Circana foodservice colleagues in the U.S., The Evolving Role of LTOs, revealed the impact of 30 LTOs across a wide variety of QSR operators and channels. The overwhelming conclusion was that LTOs can drive new visits among existing clients and attract new customers to a brand. In fact, 91 per cent of consumers report they’re likely to choose one restaurant chain over another if they offer LTOs or new items. These offers can also be an effective marketing tool for targeting specific demographic groups and influencing consumer behaviours, such as app usage or encouraging new occasions. The report also shows LTOs can help drive average eater check, even when they are paired with a price promotion.
These findings are consistent with Circana Canada’s CREST foodservice industry tracking data for the 12 months ending November 2023. Approximately one-third of QSR consumers choose their destination because they seek variety or something new, or to satisfy a craving — and they tend to spend above the average on these occasions. These traits are more prevalent among younger cohorts eager to expand their palates, while older cohorts may be more set in their ways.
When applied specifically to the QSR burger and chicken-sandwich menu categories, this search for newness and innovation represented more than half of all the servings growth in these two menu categories last year. Looking closer at the chicken-sandwich craze, the pervasiveness of the hot/spicy chicken sandwich trend in recent years connects directly to the younger cohorts every marketer is chasing. Typically offered as LTOs by the top chicken-sandwich operators, these represent 15 per cent of all chicken-sandwich servings. Interestingly, individual operator shares shift continuously as LTOs come and go, and as LTO-hungry consumers search for the next hot entrant in this craze.
Here are several ways you can refine your LTO strategy:
Simplicity: Innovation doesn’t necessarily mean revolutionary. The addition of a new sauce or topping to an existing menu item can create a unique menu experience that customers will be eager to try. The restaurant supply chain will be happy to provide options for any restaurateur who needs some inspiration — and a new SKU.
Nostalgia: This can be a powerful ingredient of LTO success to target older consumers by resurrecting previously discontinued menu items. It could also create buzz among younger consumers, who may have FOMO (fear of missing out) surrounding the returning “classic” items.
Beyond the main: New offerings on the beverage, side dish and dessert menus can be equally effective at achieving LTO goals. This is especially true when it comes to driving check size through increased order size.
Seasonality: Did you know that pumpkin-spice coffee beverages were up more than 50 per cent in the past year alone? Enough said.
The report concludes that strong LTOs have a positive impact on brand perception and customer behaviour, even after the LTO is over. And LTO buyers are more likely to be retained by the chain after the offer period ends — LTOs help lift purchase frequency in the months after the offer period. A strong LTO strategy can help operators retain and grow their customer base in this slow-growth market.
Vince Sgabellone is the director of Client Development and Foodservice Industry analyst at Circana. He can be reached at [email protected]
