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www.sense360.comMARCH 2019

STRATEGY SPOTLIGHT:

The Key Drivers to a Successful LTO

Examining the elements of 2018’s most impactful LSR & FSR promotions

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OverviewA key topic facing marketing leaders in the restaurant industry is how to most effectively run limited time offers (LTOs) and promotions.  Between development costs, advertising spend, and the risk of lowering product margins without seeing the necessary lift in revenue, there is virtually no room for error.  However, historically those same leaders have had little concrete data to measure the true performance of their LTOs, and to benchmark that performance against the LTOs of industry competitors.

Using Sense360's real-time behavioral insights, this article distills key findings from benchmarking over 200 Limited Time Offers that ran in 2018. This includes a summary of the top features driving successful LTOs, as well as four case studies to highlight particular brands that found success in the market running LTOs.

MethodologyBased on a list of 210 restaurant LTOs launched in 2018 (as identified by the restaurant publication Chew Boom), Sense360 examined the year-over-year lift in Visit Share during the promotion window, compared to equivalent dates in the year prior.  Visit Share is a core Sense360 metric displaying the % of total market visits received by a particular brand.

Using logistic regression and analysis of correlation factors, Sense360 identified the attributes of the LTO and brand running it that best explained year-over-year relative lift in Visit Share.  These attributes included factors like the kind of promotion run (e.g. new menu item, discount, etc.), the recent performance of the brand outside of the promotion window, and the size of the brand.

Sense360Sense360 is a data and insights company that empowers business leaders to continuously grow their business by making consistently great decisions, quickly and with conviction. Through bringing together all the data that matters and creating accurate tools that are highly accessible and supported by a team of experts, Sense360 is revolutionizing the current state of market research -- which has been plagued by high-cost, static products that are neither timely nor accurate. Sense360 was founded in 2014 and is headquartered in Los Angeles. For more information, please visit our website: www.sense360.com.

BY THE NUMBERS

209Limited Time Offers catalogued & analyzed

68Distinct Brands

85%of LTOs Introduced a new item

30%Included a Discount

5%Included a free item

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1 The market in 2018 was saturated with limited time new menu items, making it hard to stand out.

New Menu items were incorporated in a whopping 85% of all the LTOs in the sample.  What makes this troubling is that our data showed a negative correlation with launching a new menu item LTO and achieving Visit Share lift.  A bright spot was specifically for LTOs of value menu items, which saw a positive correlation with Visit Share lift.

This offers unique insight into just how hard it is to stand out when the rest of the market is also introducing new items.  Unless the menu item is appealing to a different consumer or dining occasion (as is the case more often with the launch of value menu items), new menu item launches run a high risk of cannibalizing existing purchases and not creating incremental Visit Share lift.

2 Discounts & Free Items made a splash.

Among categories of LTOs, discounting and free items were most correlated with lift in Visit Share.  Many of the best performing LTOs of the year fell into this category.  Though perceived as good value by consumers and likely to drive incremental traffic (as shown by the data), discount and free item LTOs shouldn’t necessarily be viewed as a guaranteed winning approach.

Despite likely Visit Share gains, brands should be cautious of eroded margins canceling out any net benefits of increased traffic, and the potential of poor retention rates from consumers that responded just to this LTO may create little to no long-term value.

Key Themes Emerge For The Top Performers

Our intent was to understand the LTO environment of the restaurant industry and if certain factors have a consistent pattern of driving LTO performance.  Several key themes stood out in our analysis.

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3 Large brands with strong recent performance saw the most growth

The momentum of the brand throughout 2018 (Visit Share gains the brand had in 2018 even outside of the LTO window) was the highest correlated factor with Lift.  Among those with positive momentum, larger brands did especially well.

This shows Limited Time Offers have the ability to complement winning strategies. However, for brand’s that have negative momentum, it could be indicative of bigger systemic problems that are beyond what an LTO can solve. Additionally, sufficient customer awareness matters in LTO performance, and large brands have the reach and advertising budgets capable of building the awareness needed to generate Visit Share lift.

Burger King: 3 Pancakes for 89 cents

Burger King introduced a 3 pancake entrée for 89 cents in mid-November of 2018. In the month following, Burger King saw it’s National Visit Share during breakfast improve by 0.46% compared to the same period during breakfast in the year prior (a 10.2% relative lift). While many of the new menu items introduced throughout 2018 created little lift, if any, for their brands, value-focused promotions like these tended to have a greater impact. In this case, the new menu addition created a lift in foot traffic for Burger King.

+.46% Visit Share Lift +10.2% Relative Lift

Chipotle: Late Night Taco Happy Hour in Miami & Dallas

Chipotle introduced a Late Night Taco Happy Hour in Miami, FL and Dallas, TX in August of 2018. The brand offered $2 tacos if you made the purchase of any drink after 8pm. The discount on their tacos resulted in a lift in their National Visit Share of 0.3% on an absolute basis, or 25.1% relative lift, from a year prior. While Chipotle still required a purchase, the discounted entrée offerings appeal had a tangible impact on foot traffic.

+.30% Visit Share Lift +25.1% Relative Lift

TOP PROMOTIONS OF 2018

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Taco Bell: Steal a Base, Steal a Taco

Taco Bell brought back it’s “Steal a Base, Steal a Taco” promotion for its 7th year. When Mookie Betts stole a base in the 2018 World Series, he entitled Taco Bell guests to claim a free Doritos Locos Taco from 2pm to 6pm at Taco Bell’s Nationwide on November 1st, 2018. Taco Bell saw a 1.1% lift in their National Visit Share on the day compared to the Year prior, a 23.3% relative lift. This promotion has been a market favorite for the past few years and is an extreme example of how impactful discounting and give-away promotions can be in driving visits.

+.46% Visit Share Lift +10.2% Relative Lift

Chick-fil-A: Lime Shake’s in Austin,TX

Chick-fil-A introduced a Key Lime Shake in Austin Texas in October of 2018. Chick-fil-A saw a large 2.6% lift in their Visit Share Year over Year during the promotion (a 45.2% relative lift) without offering any special discounting. Chick-fil-A is a brand that saw strong growth in 2018, especially in markets like Austin, TX, and the strong growth during this promotion exemplifies the way strong growing brands can use LTOs to further bolster their market position.

+2.6% Visit Share Lift +45.2% Relative Lift

LTOs: Key TakeawaysLimited Time Offerings usually play a big part for a QSR brand’s marketing strategy , but only a few promos stand out and have the ability to drive meaningful value. The new menu item LTO is the popular tactic of the moment, but brands are running them at the high risk of cannibalizing their sales. We recommend QSR operators consider the following when launching an LTO:

• Though popular, discount and free items LTOs shouldn’t shouldn’t be viewed as a guaranteed winning approach

• If the main goal is to drive visit share lift, a new menu item LTO will likely fall short.

• If your brand has positive momentum, make sure to maximize it with an LTO.

Empowering consistently great decisions

MARCH 2019 www.sense360.com

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March 2019 www.sense360.com