Burger King is changing its value strategy, including a reduction in the use of paper coupons./Photograph: Shutterstock Burger King is cutting coupons. Specifically, the fast-food chain has been reducing the frequency with which it uses paper coupons to get customers in the door.
Apparently, company executives said, younger consumers don't use them enough. Burger King wants to spend its money instead on offers that will actually get them in the door. "It's been traditionally an important channel," Jose Cil, CEO of Restaurant Brands International. "But its effectiveness has eroded over time, especially with younger consumers." Burger King's move away from paper coupons is coming along with a broader move away from the value frequency with which the brand had been known for years.
The chain has traditionally carpet-bombed the market with value offers and paper coupons. It has typically been the biggest discounter among the three big burger chains, often running three times as many value offers. That value focus has not translated into sales of late as consumers have instead bought larger menu items and willingly paid higher prices for their meals.
Burger King's sales have fallen behind its competitors and that likely continued in the third quarter, when its same-store sales declined 1.7%. That came on top of a 3.2% decline in the same period a year ago, making it a two-year decline of about 5%. Cil told investors on Monday that the company is aware of its gap with competitors and has long-term plans to fix it.
Ditching paper coupons impacted the chain's same-store sales in the third quarter, Cil said. But taking that step could help the brand move toward options that have a stronger return on investment. "We felt it makes sense to transition media allocation and focus on other consumer-facing channels that we believe over time will generate higher return," Cil said.
Specifically, those channels could be digital, particularly through its Royal Perks loyalty program the company introduced earlier this year. Loyalty programs are more successful with younger consumers. The offers target existing customers, rather than a more general audience.
"This is what Royal Perks is designed to do," Cil said, noting that shifting offers to "known diners" can help the company "engage them better and drive guest behavior and ultimately build a strong base with the younger generation." Burger King should be able to shift its focus "quickly," Cil said. "We believe we'll be able to shift to a much more accretive digital coupon and digital engagement over time." Yet the brand is looking to get it right on value, generally.
The company last quarter ran a pair of offers, including a 2-for-£6 offer and a buy-one-get-one offer, which didn't resonate as well with customers as the chain's offers in the same period a year ago. Cil believes the company ran too many such offers, confusing guests and hurting operations. "For years, we've been spreading ourselves too thin across too many messages with mixed results," he said. "Historically, we've consistently had the most value constructs in the market, three times as many as our lead competitors, which diluted marketing firepower and added to operational complexity. It also confused guests."
Burger King said its investments in digital and data analytics gave the company a clearer view of these efforts.
Cil said the chain is now focused on "fewer, more impactful offers and value platforms."
In other words, Burger King is planning to shift that carpet bombing towards a more targeted value offer strategy.