Restaurants Continue to Offer a Cost Advantage as Grocery Inflation Climbs

 

Consumers are facing pressure from multiple points, and the current economy is shifting their behavior, which presents a restaurant marketing opportunity.

  • Record inflation of 7.1% continues to outpace growth in wages.
  • Consumer discretionary spending is down as ritual household expenditures such as gas, utilities, and groceries face strong upward pressure.
  • Customers are trading brand preference and loyalty for greatest perceived value.

Brands that understand the new consumer value equation can create preference and steal share.

While the impact inflation is having on the consumer and the restaurant industry is well known, the impact inflation has had on the Rural consumer is not as widely known.

In an analysis of CPI data by Iowa State, from June 2020 to June 2022 Rural consumers saw a 49.1% reduction in their discretionary income compared to only 13.1% for Urban consumers.  During this period earnings only rose 6.1% against inflation of 9.1%.

Value is more important NOW to the consumers in the rural markets Mspark serves!

Inflation & Rising Prices Impact on Rural Consumers

Restaurants (food away from home) continue to have a cost advantage over grocery (food at home) with inflation rising slower for restaurants.  When the gap widens and restaurant inflation is lower, restaurant typically see a rise in sales when the manager of the household budget determines “It is cheaper to eat out!”  The gap has declined from 5.5 points in July to 4.5 points in September, and 3.5 points in October and November. The 12-month Grocery inflation declined from 13.5% to 13.0% while inflation while restaurants increased from 8.0% to 8.5%

However, inflation is hitting pocketbooks hard, and consumers are looking for lower prices (52% want more deals and value).

The cost advantage restaurants currently offer over groceries is enabling restaurants to win market share.

Check out our case studies below to see how restaurants have leveraged multi-channel campaigns anchored by direct mail to increase market share and ROI. For more restaurant marketing strategy and insights, visit our Restaurant Resources page, and download our Restaurant Marketing eBook. Reach out today to plan your strategy!

Sources: Bureau of Labor Statistics, November 2022 CPI Report; Iowa State analysis, July 2022 (CPI, June 2020-June 2022); US Census Bureau – October Monthly Retail Trade and Food Services (shown in million dollars)

 

Restaurant Case Studies

Casual Dining Restaurant Chain

Objective

A casual dining restaurant chain was seeking to increase traffic and ROI at restaurant locations.

Our Approach

  • Targeted ZIP codes based on propensity to dine out
  • Mailed a Targeted Insert to 16,685 households surrounding the location
  • Maintained consistent monthly frequency with appealing offers

The Results

200

Coupons redeemed after one mailing

$5.48

Received in sales for every $1 spent on advertising

$5,453

Return on investment

Fast Casual Asian Restaurant

Objective

A local Asian restaurant with 4 locations in Texas needed a cost-effective marketing program that would increase average ticket sales and drive customer traffic.

Our Approach

  • Identified & targeted key ZIP Codes surrounding 2 locations
  • Utilized a targeted insert to engage 39,000+ households
  • Created an effective ad with attractive offers to drive response

OFFERS: 

  • $3 OFF with purchase of $15
  • $5 OFF with purchase of $25
  • $6 Student Meals
  • $20 OFF Catering of $100 or More
  • Kids Eat Free Every Thursday

The Results

$4,000

sales increase for one location

60%

sales increase during the first week for the second location

2

additional stores began using the mailbox to drive traffic

National Quick Serve Restaurant

Objective

Objective: A national restaurant chain was looking to encourage franchise participation after a successful advertising partnership with Mspark.

Our Approach

  • Partnered with corporate to provide an affordable advertising solution
  • Encouraged franchise participation with a program for 2 consecutive in-home dates
  • Targeted the best households surrounding each restaurant location using Wraps and Targeted Inserts

The Results

$2,013

Average margin generated from one mailing.

$7.40

Gross margin generated by each coupon was $4.75 - $7.40

Regional Quick Serve Restaurant

Objective

A regional QSR was looking to target households and drive traffic to four of their regional locations across multiple months.

Our Approach

  • Identified the client’s key geography to build out both direct mail and digital components of the campaign utilizing Targeted Inserts + Addressable Geofencing (AGF) Digital Display Ads.
  • For digital, we targeted the full direct mail list with about a 98% match rate.
  • The direct mail pieces dropped at the end of each campaign month. 18 digital impressions targeting the same households deployed over the course of 10 days, starting 1-2 days before the direct mail piece hit the mailbox.
  • Campaign results were tracked by monitoring website traffic, as well as foot traffic attribution at all 4 locations.

The Results

360,215

Impressions

0.20%

CTR, 2x greater than the industry average

715

Website visits and 117 foot-traffic conversions

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